Update on the Assignment of Benefits (AOB) Issue in Florida

27 Feb
View of a Southwest style Florida home in the countryside.

In the continuing battle over the assignment of benefits (AOB) issue in Florida, the Senate Banking and Insurance Committee recently tabled a bill (SB 122) that had been sponsored by Chairman Doug Broxson, R-Gulf Breeze. The bill was designed to limit attorney fees in AOB cases. The bill was tabled after it became clear that it would not pass. 

Sen. Tom Lee, R-Thonotosassa, joined with three Democrats to oppose the bill, which made it impossible to gather a majority on the eight-member committee. This was a major blow to the insurance industry and their allies who claim that attorney fee limits are necessary to help curb AOB litigation. 

Lee said in a recent Daily Business Review article that he joined with the democrats because there are  “some bad actors on both sides of the equation” and he felt that the bill could end up causing problems for consumers who have legitimate claims for water damage. 

“We are going to kill the patient while we try to cure the problem,” Lee said in the article.

Other lawmakers felt that while the bill may not have been perfect, lawmakers need to address the AOB issue. Sen. Keith Perry said the bill “is a step in the right direction” according the Daily Business Review article. “We owe it to the working-class people of the state of Florida to do something,” Perry, R-Gainesville, said in the article.

What is AOB Issue?

The AOB issue has been going on for years and has been a major factor in pushing up Florida’s homeowners insurance rates, which are currently the most expensive in the nation according to ValuePenguin. While lawmakers have considered a number of different proposals, they have been unable to reach an agreement.

When a homeowner who is having a repair done on their home signs an AOB form it basically signs over their insurance coverage to the contractor. This gives them the right to make some decisions about the repairs and bill the insurance company directly. Unfortunately, less than honest contractors often bill for repairs that were not made or overcharge in many cases. When the insurance company declines the claim, the contractor sues. 

Under Florida law, policyholders and contractors who have a signed AOB form are entitled to have their attorney fees paid if they bring a lawsuit against an insurance company, which means there is little downside to bringing a lawsuit. 

While many lawmakers feel that the whole AOB process needs to be addressed, this bill only addressed the legal fee issue. Broxson’s bill would have prevented contractors from collecting attorney fees if they brought the suit. Homeowners who handled the claim themselves and sued the insurance company would still have the right to collect attorney fees. 

The staff analysis said in the article that such a change would “make the assignment of post-loss benefits less valuable. The assignee [the person assigned the benefits] would have to pay his or her own attorney fees to enforce the insurance contract.”

Opponents of the bill feel that assignment of benefits and insurers covering legal fees are necessary as insurers sometimes try to avoid paying large claims. 

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