The Florida legislature has sent a bill to Governor Ron DeSantis to reform the Assignment of Benefits abuses that have pushed up Home Insurance prices. Governor DeSantis has stated that he plans to sign it.
Once signed, it will become law on July 1, 2019.
Assignment of Benefits or (AOB) was originally designed to help streamline the claims process by allowing homeowners to assign the benefits of their policy to contractors who would repair the damage and work directly with the insurance carrier for their payment.
Unfortunately, the system was gamed by unscrupulous contractors and their attorneys, who would inflate the cost of repairs and sue the insurance companies if they refused to pay. Insurers wound up paying the inflated claims rather than engage in costly court battles, and as a result passed the cost to their policyholders. Many of these contracts also included clauses making the homeowner responsible if the insurance company failed to pay.
Here's the main points of the reform
•Non-AOB policies: Insurers will be allowed to offer policies that don't include, or restrict, AOB claims. A contract that does not allow a homeowner to assign benefits should cost less than one that does.
•Limit attorney fees: Another key part of the bill would limit attorney fees in AOB lawsuits filed by contractors against insurers.
•New AOB requirements: AOB's must be in writing; include an itemized estimate, a written disclosure and a 14-day rescission period. Once completed, assignees have three business days to notify the insurer.
•Homeowner protection: If a homeowner's policy doesn't allow AOBs yet they sign one anyway, the AOB assignee must hold policyholders harmless from all liabilities.
•Emergency repairs are capped at $3,000 or 1 percent of the coverage limit in a homeowner's policy until the company's claim adjuster has surveyed the damage.
•AOB assignee rules: A company holding an AOB contract must give documents to insurers when requested, answer questions under oath and agree to participate in alternative dispute resolution.
•Pre-litigation requirements: If an AOB firm wants to file a claim against an insurer, they must inform the homeowners before filing the lawsuit.
•Insurer requirements: If an AOB assignee submits a pre-suit notification, the insurer has 10 days to respond with a settlement offer or other alternative, such as a new appraisal or other form of dispute resolution.
Although it does not force homeowners insurance companies to lower their rates, insurers have cited the high cost of AOB lawsuits as the reason behind recent increases in premiums. So at the very least, it should stem the tide of rate increases. Citizens is rescinding their request for an 8.2% rate increase and will be resubmitting a recalculated revision. Let's hope the other insurers follow suit.