Senate Business and Industry Committee Chairman Doug Broxson has identified reforming the one-way attorney fee provision in the state’s assignment of benefits (AOB) law as his "No. 1 priority" for the 2019 legislative session.
To accomplish this, he has introduced Senate Bill 122, which would award attorney fees only to policyholders who win litigated claims, not to "vendors" who are "assigned" insurance benefits in AOB agreements.
Florida allows landowners to sign over insurance benefits to contractors to pursue payment from insurers for "upfront" work. Critics maintain its "one-way" attorney fee provision "incentivizes" attorneys to file lawsuits as a standard business practice.
Numerous AOB-reform bills have been introduced since 2013 but all have failed. In 2018, an AOB bill passed the House in an 82-20 vote but never made it out of the Senate Insurance and Banking Committee, then chaired by Sen. Chair Anitere Flores, R-Miami.
But now that committee is chaired by Broxson, R-Pensacola.
On Tuesday, he invited state Chief Financial Officer Jimmy Patronis, Insurance Commissioner David Altmaier and Citizens Property Insurance Corp. CEO Barry Gilway to explain how AOB-related lawsuits are driving up insurance premiums by as much as 36 percent for many of Florida’s 6.2 million policyholders.
After the three identified the problem, Broxson's plan was to stage a "quasi court procedure" pitting former Supreme Court Justice Kenneth Bell, representing the Personal Insurance Federation of Florida, against Orlando attorney Lee Jacobson, representing the Florida Justice Association..
Unfortunately, 90 minutes proved inadequate, with Patronis, Altmaier and Gilway consuming more than 70 minutes discussing the AOB crisis, leaving little time for Bell and Jacobson to make their cases.
Since 2010, Altmaier said, the frequency of water losses, and mostly from South Florida, have increased 46 percent and the "severity" – monetary awards – has risen 28 percent.
"Both numbers are getting worse," he said. "Rate increases are the best consumers can hope for if this issue is not resolved."
Gilway said Citizens will propose an 8.2 percent rate hike in March for at least 420,000 of the 435,000 homeowners covered by the state-sponsored ’"insurer of last resort" because of AOB-related lawsuits.
That hike would be three to four times higher – like many commercial insurers’ rate increases – if Citizens wasn’t prohibited from raising rates by more than 10 percent annually, he said.
In 2013, Citizens fielded 27,416 lawsuits, Gilway said. Last year, it dealt with 82,663. The average difference between a litigated AOB claim and a non-AOB claim is $25,000, he said.
"Multiply that increase of 56,000 litigated cases by $25,000 for each case and you come up with a $1.3 billion impact. That is why rates are increasing," he said.
Gilway said AOB-related lawsuits are endangering Citizens’ "depopulation" efforts to get the state out of the insurance business.
At its peak, he said, Citizens insured 23 percent of the market, including 45 percent of homes, with the state on the hook for "a half-trillion dollars in exposure." Now, Citizens covers 5 percent of the market, including 7 percent of homes, insuring $4.9 billion in property.
And it’s getting worse, Gilway said. "When you hear this is a South Florida problem, it was until 2015, 2016 – but now, it’s exploding across the state."
Nowhere more than in the Panhandle, Patronis said, where in Hurricane Michael’s wake, the same solicitation practices common in South Florida are becoming prevalent.
"You would think it is campaign season in northwest Florida right now," Patronis said, noting roofing companies, attorneys and adjusters are "all engaging in direct marketing campaigns – there is blood in the water in northwest Florida."
AOB agreements "have value and merit," he said, but "bad actors" have "allowed this to become perverted. It has become a deceptive process" that "drives up costs not just for you and me but for everyone. The data speaks for itself."
AOB reform is "not the only solution" but "doing nothing is dishonorable and disrespectful" to the state’s 6.2 million policyholders, Patronis said.
The lawsuit explosion "all began with the Johnny Appleseed of AOBs" — Orlando attorney Harvey Cohen — and stem from "a small group of attorneys," adding "one attorney filed 30,000 AOB lawsuits in 2018."
Jacobson said Broxson’s SB 122 would impose government restrictions on consumer choice, interfere in the free market and hurt small businesses. Consumers "are not forced to sign" agreements, he said.
AOBs are a "consumer-friendly tool" that allow the assignee to "stand in the shoes of the insured," Jacobson said, noting "most (clients) I represent are mom and pop businesses."
Broxson acknowledged much remained on the table but promised his committee would dedicate as much time as necessary to develop a solution for this legislative session.
"We’ve got to own this issue once and for all," he said.