Florida House’s AOB reform bill passes, now waits for Senate response

FILE - Hurricane Irma damage

A Florida home damaged in Hurricane Irma Shutterstock photo

By John Haughey  |   Watchdog.org

The Florida House has moved quickly to adopt a bill that would impose a range of restrictions on assignment of benefits agreements between property owners and contractors.

The legislation also eliminates a “one-way” attorney fee provision that has spurred a landslide of lawsuits that insurers say is partially responsible for the state’s skyrocketing homeowners’ insurance rates.

HB 7015, co-sponsored by Reps. Jay Trumbull, R-Panama City, and Michael Grant, R-Port Charlotte, and endorsed by the House Judiciary Committee, passed the House on an 82-20 vote Friday, just the fourth day of the 2018 session.

“We applaud the leaders of the House for pushing assignment of benefits legislation in the first week of the session — it sends a strong message,” said Ron Bartlett, spokesman for the Consumer Protection Coalition (CPC), an advocacy group created by the Florida Chamber of Commerce to spearhead support for AOB reform.

Among coalition members are the Florida Association for Insurance Reform (FAIR) and the Personal Insurance Federation of Florida (PIFF).

With an assignment of benefits (AOB) bill hurried through the House, three AOB-related proposals wait in the Senate. This is the sixth consecutive year Florida lawmakers have deliberated AOB legislation. While the House has demonstrated an ability to pass one for two straight sessions, the Senate has not followed through.

Last year, the House passed HB1421, similar to this year’s HB 7015, with 72 percent of the vote, but its Senate companion failed to gain traction. There are now three AOB-related bills in the Senate Banking & Insurance Committee, including Sen. Dorothy Hukill’s, R-Port Orange, SB 62, which would prohibit attorney fees from being awarded in any property insurance dispute. The others are SB 256, sponsored by Sen. Gary Farmer, D-Fort Lauderdale, and Sen. Greg Steube’s, R-Sarasota, and SB 1168, which includes many HB 7015 provisions, but doesn’t address attorney fees at all.

How the Senate responds to HB 7015 and the three AOB bills in committee — if it does so at all — is “the big question,” Bartlett said. “The Senate is the unknown.”

The bill is opposed by the Florida Justice Association (FJA), which represents 3,000 trial attorneys, and the Florida Association of Restoration Specialists (FLARS), a trade group that lobbies on behalf of independent contractors.

The FJA maintains that the legislation would force homeowners to pay upfront, out-of-pocket, for time-sensitive repairs and that its “complicated” attorney fee formula entitles insurers to receive payment for attorneys’ fees even if a contractor wins a judgment.

“There are things in this bill that are not friendly to the citizens of the state of Florida,” FLARS President Jeff Grant said in a position paper against the bill. “I’m all for a good bill that protects policy holders, restoration contractors and insurers, but this is ‘steering’ legislation – it steers [policy holders] to [insurers’] preferred vendors” rather than allowing people to select the best contractor for the job.


Florida statute allows property owners to sign over insurance benefits to contractors after a loss, such as those induced by a hurricane, to directly pursue payment for work. AOB agreements are designed to expedite repairs to a damaged property by guaranteeing payment for “up-front” work through a homeowner’s property insurance.

Insurers maintain the “one-way” attorney fee provision in AOB regulations encourages lawsuits. Even if an insurer wins a court ruling, state law stipulates it must pay its own legal costs. If the insurer loses, it must pay the contractor’s attorney fees — even if the judgment is a dollar above the initial offer. This “incentivizes” unscrupulous contractors and attorneys to submit inflated, fraudulent claims, the CPC, FAIR and PIFF have claimed.

According to the Florida Office of Insurance Regulation (OIR), AOB property claims, particularly for water damage, have increased from 405 in 2006 to 28,000 in 2016. Correspondingly, the Property Casualty Insurance Association reports that AOB lawsuits have increased by more than 300 percent since 2011.

The OIR cites the spike in AOB claims and related lawsuits as a key factor in escalating property insurance rates statewide. In 2014, 63 percent of Florida property insurance providers decreased rates while in 2016, the OIR reports, 73 percent filed for rate increases.

Citizen Insurance – the state-operated “insurer of last resort” – claims AOB litigation is a primary reason why it is proposing double-digit rate increases in 2018 and foresees doing so annually until state lawmakers impose reforms. Citizen estimates a homeowner’s insurance policy on a $150,000 home in Broward County will increase from $2,390 in 2017 to $3,850 in 2018, and jump by $6,000 above what it is now in Miami-Dade County in five years.


CPC’s Bartlett said HB 7015 provides “good, common-sense consumer protections” by allowing policy holders to rescind AOBs within seven days and requiring insurers be notified within three business days of the assignment. That is pivotal, he said, citing a Citizens’ report that “in eight out-of-10 cases in Miami-Dade County, the first (AOB) notice the insurer received that there was a claim was from a trial attorney, not the policy holder.”

Bartlett said the bill features “an additional level of consumer disclosure” by requiring – “in 14-point upper-case text” – a notification clarifying “that the policy holder is agreeing to give up certain rights by doing an assignment of benefits.”

FARS’ Grant has no issue with allowing policy holders seven days to withdraw from an OBA agreement.

“I’ve never had a problem with a customer who didn’t want me in their house,” he said.

Grant said FARS is not opposed to a timeline for informing insurers that a policy holder has signed an OBA agreement “as long as we have a direct line” to decision-makers who appreciate that some repairs can’t wait “until you get the OK to move forward.”

FARS opposes mandating contractors submit to examinations under oath (EUO) by insurance investigators. Grant said while this is a requirement for lawsuit depositions, the bill restricts contractors’ ability to sue, but exposes them to increased legal and, potentially, criminal liabilities. EUOs will be “required now for virtually everything,” he said. “It just gives them the ability to ask stupid questions.”

The bill establishes an attorney fee formula that “levels the playing field,” Bartlett said. If the difference between a lawsuit judgment is less than 25 percent of the amount initially offered, the insurer can collect attorneys’ fees. If it is between 25 and 50 percent, no party is awarded attorney fees. If the judgment is 50 percent or above the disputed amount, the contractor is entitled to attorney fees.

HB 7015 features “more or less the same formula” from the 2017 House bill, Bartlett said. “It is not perfect but it is better than the current system.”

FJA Communications Director Ryan Banfill said lawsuits — and the attorney fees they generate — would not be necessary if insurance companies were fair in paying policy holders’ legitimate claims. He declined to elaborate further, referring to the association’s position points outlined in its “Issues Book.”

“One-way” attorneys’ fees discourage insurers from denying or withholding benefits on valid claims, the FJA states. The association maintains AOBs are standard operating procedure in healthcare, where patients routinely assign insurance benefits to providers, allowing treatments to commence before receiving payment.

“It’s a proven model,” the FJA claims, “like the one that has served property owners for nearly a century.”

Grant said if insurers quickly dispatched properly trained adjusters to damaged properties, there would be fewer discrepancies resulting in lawsuits, adding the “crisis” in skyrocketing rates is a “scare tactic” the insurance industry is exploiting to gain control of the claim process. The House bill and the three Senate proposals do not set forth a process for challenging adjusters’ estimates, he said.

AOB agreements are “common practice,” Grant said. “This legislation would take Florida out of the vast majority of states who not only allow the right to assign the benefits of a contract, but also affirmatively protect the right to assign benefits.”

True, Bartlett said, but “the high incidence of AOB lawsuits is unique to Florida. It is happening nowhere else like it is here. Unfortunately, the reason for that is Florida has a very active litigative environment and a very aggressive trial lawyer community.”

 The American Tort Reform Foundation recently ranked Florida as the nation’s “worst judicial hellhole,”  Bartlett said. “The AOB issue in Florida is being watched closely across the country. With this bill, Florida can jump out ahead and pass reform that works.”

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