Review of Florida’s Inflated Homeowners Insurance Claims & Costs

20 Feb

Florida legislators are looking into one-way attorney fees that have been one of the sources of inflated homeowners claims related to the Assignment of Benefits (AOB) issue that many people blame for the Sunshine States high homeowner insurance costs. 

Currently, Florida is the most expensive state in the country for homeowners insurance with the average premium coming in at $2,055 according to ValuePenguin. This is almost double the national average of $1,083.

AOB Explained

When a homeowner needs a property repair done (especially roofing or water damage) the contractor may ask them to sign an AOB form. This basically signs their insurance benefits over to the contractor who can then request payment from the insurer and even make some decision about the repair. 

This has led to less than honest contractors submitting claims for inflated costs or even for work that was not done. When the claim is denied because of the inflated costs the contractor partners with a shady law firm to sue the insurer. In most cases the insurer settles because it is cheaper than ligating the matter through the courts. These costs are passed on to consumers through ever increasing premiums.

One factor that makes it profitable for law firms to sue over AOB is that their legal fees are covered whether they win or lose by the insurance company, which is a big incentive to bring a lawsuit regardless of its merits. 

Florida’s ‘David and Goliath’ law requires insurance companies to cover the legal costs of their customers for lawsuits related to claims litigation. Even if the insurance company wins the suit they still have to pay the legal fees of their customer. The law was originally intended to keep deep-pocketed insurers from using lawyers (and the high cost of a lawsuit) to discourage individual homeowners from filing suit over claims.  Unfortunately, it has led to abuse by shifty lawyers who sue over AOB claims because there is no real downside, their costs are covered regardless of whether they win or lose. 

Legislators May Change Law

At a recent Florida House Civil Justice Subcommittee members listened to insurance industry executives regarding one-way attorney fees and how this statute encourages unnecessary litigation, which ultimately pushes up premiums for everyone.

Insurance companies would like to see their legal fees covered by law firms that bring AOB suits if the insurance company wins. This would help discourage the less than honest AOB lawsuits that have been cropping up over the last decade. 

A recent report by the Insurance Information Institute (I.I.I.) found that in 2000 there were roughly 1,300 AOB lawsuits across the state. This number had jumped up to 79,000 by 2013 and was over 135,000 through the first part of November 2018. This is a 70 percent increase over five years. 

“We estimate Florida’s auto and homeowners policyholders have paid about $2.5 billion in insurer legal costs over the past dozen years, a troubling trend driven by plaintiff’s attorneys who are abusing Florida’s current AOB system,” said I.I.I.’s Chief Actuary, James Lynch in a recent Insurance Journal article. “That doesn’t count the billions more in excess claim settlements that are at the heart of the problem.”

Legislators Hear From Insurance Companies

According to a recent article on FLAPOL, a website that covers campaigns, elections, government, policy, and lobbying in Florida, legislators have been hearing from their constituents about the high cost of homeowners insurance and are looking into solutions which is why the House Civil Justice Subcommittee held a hearing.

“What we heard today is that the one-way attorney fee provision in Florida law is being exploited. And that the result of that is an increase in the cost to Floridians to have homeowner insurance,” said Democrat Ben Diamond of St. Petersburg. He has suggested that lawmakers restricting the one-way attorney fees structure to only policyholders, excluding third parties which would take away the incentive for law firms to bring suits with no merit. 

According to the article, Citizens Property Insurance Corp. President and CEO Barry Gilway informed the panel that successful AOB reform would help reduce rates. 

The hearing is just the first step toward AOB reform but many Florida residents hope it will lead to lower homeowner rates. 

Dealing with a Claim

Here are a few quick tips for dealing with a homeowners claim to make sure that you are paid fairly and quickly:

  • Don’t Sign an AOB Form: In the majority of cases the only contractors using these forms are less than honest. It is almost always a better idea to handle your claim yourself. If you feel your claim has not been handled fairly you can still hire your own attorney and your legal fees should be covered.
  • Notify Your Insurer Immediately of Damage:Notify your insurance company as quickly as possible about damage so they can send an adjuster out and get working on your claim
  • Take photos and Video:Always document your claim as soon as it is safely possible. Take video and photos of all the damage and be sure to shoot photos from a variety of angles. This will document your claim and also help the adjuster assess the damage. Never climb on a roof or other structure that has been damaged or compromised. 
  • Inventory Your Losses: Document and list all of the possessions you have lost. Keeping up-to-date home inventory will help with this process. There are numerous home inventory apps available that can make this tedious process a bit easier. 

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