Optimism is growing in Florida that 2019 could be the year that a new law is passed to alter one-way attorney fees on assignment of benefits (AOB) insurance claims.
The state has tried to make changes for six years and came close in 2018, when a bill was voted on favourably in the House of Representatives before dying at committee stage in the Senate.
This year both the Senate and the House have drafted bills to tackle the issue.
Under current AOB legislation in Florida, the one-way system means if a consumer signs an AOB with a third-party service firm or contractor and that company pursues a claim against an insurer in court, their legal costs are paid if they win. However, if the contractor loses, the insurance company cannot reclaim their costs.
“I am much more optimistic this year that we will effect some change,” said Barry Gilway, president and CEO of Citizens Property Insurance.
Gilway is not calling for AOB to be eliminated and wants insureds to have access to one-way attorney fees.
“Our issue is a third party, a contractor, having access to the one-way attorney fee statute,” he continued. “It was never intended to do that and to the best of my knowledge we are the only state in the union that allows that to happen.”
The present system stands accused of allowing service vendors to submit inflated bills, effectively pressuring insurers to pay the bill or be sued. Claims costs have escalated as a result, leading to higher insurance rates.
While there are similarities in the reforms that are working through the House and Senate, there are also differences (see table). There are many committee stages and votes to be navigated but ultimately one unified version will have to appear.
“There has to be a meeting of the minds between the House and the Senate about exactly what that language is going to look like,” said Paul Handerhan, senior vice president of public policy at the Florida Association for Insurance Reform.
All the experts stressed that the final wording of a successful bill would define its impact on (re)insurance rates, but opinion was divided on how forcefully and quickly that impact would occur.
According to Gilway, across the Florida insurance industry there were 27,416 litigated property cases in 2013, rising to 82,663 last year. With AOB cases going from 5,473 to 21,052 over the same timeframe, he said it had gone “far beyond creep” to reach “crisis proportions”.
In December the Citizens board approved a request for an 8.2 percent state-wide average increase for personal lines policyholders.
In Gilway’s opinion, Citizens’ true rate need was 25.2 percent, but a “reasonable” change to the AOB system would cut that to 10.1 percent.
Handerhan, though, suggested reform could take three or four years to work through, with thousands of cases already in the system.
Another expert opined that most market participants would “want to see any new legislation tested in the court system before they say it is going to work”.
Tyler Chasez, an attorney in private practice from central Florida, predicted that considering the amount of attention the topic has been getting, some reform would happen this year, but he warned there would be no change to the level of claims.
“If there is poor adjustment or a bad denial or underpaying people, consumers’ complaints are not going to go away,” he argued. While accepting there may be fewer AOB claims, he concluded: “That doesn’t mean the insured isn’t going to sue.”