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Florida lawmakers have once again let slip an opportunity to address insurance claims abuse, as legislation failed to make it through the Senate before the 2017 legislative session ended Friday.

This is the fifth consecutive year that a bill on curbing assignment of benefits (AOB) abuse associated with water loss claims has failed.

Disappointed proponents of reform blasted the failure as a defeat for consumers but vowed to try again next legislative session.

This year’s bill— — was advanced at the end of April by the Florida House of Representatives. It was sponsored by Rep. James Grant (R-Tampa) and supported by consumer and insurance advocates.

“I’m disappointed that we were not successful in convincing the Legislature that we need its assistance to address this challenge,” said Barry Gilway, Citizens president, CEO and executive director. “Unfortunately, I’m afraid our customers will ultimately pay the price through higher premiums.”

AOB abuse in Florida has skyrocketed over the last several years, driving up litigation costs and property insurance rates across the state. The industry says the abuse is being led by attorneys working with unregulated water damage remediation firms.

Industry and consumer advocates, as well as Florida Insurance Commissioner David Altmaier, were counting on lawmakers to close a loophole they say encourages the abuse – Florida’s one-way attorney fee statute. They say this statute is designed to be a policyholder protection but is being exploited by trial lawyers and vendors that obtain an AOB from a policyholder and then sue the insurer. The statute mandates that attorney fees be paid by the insurer if a claim is found to have been underpaid by any amount.

“We believe that the major incentive to the abuse that we have seen over the past few years is the one-way attorney fee statute,” Altmaier told a Senate committee in early April.

The House bill would have chipped away at incentives for third parties to sue insurance companies by awarding fees under a formula based on the judgement obtained by the assignee and the pre-suit settlement offer. Under the formula, attorney fees could also be awarded to the insurer, or possibly no one, depending on the amount of the judgment. The bill also included other consumer and insurance company protections for AOBs in regards to litigation and assignment agreements.

Altmaier and the industry actively lobbied the Florida Legislature for the AOB reform this year after watching similar efforts fail over the last four years, but these stakeholders confronted pushback from the trial bar.

Business lobbyists said property insurance customers will end up paying for the lawmakers’ inaction.

“Florida’s hardworking families should remember this – the Florida Senate chose to side with anti-consumer special interests, instead of stepping up and protecting consumers from an AOB loophole that has attracted plaintiffs’ attorneys like gold rush miners,” said Edie Ousley, vice president of Public Affairs for the Florida Chamber of Commerce, which spearheads the Consumer Protection Coalition, a group against AOB abuse. “Their failure to act means homeowners will be forced to spend more on property insurance in the coming year and home ownership will become less affordable for many Floridians.”

Florida’s insurer of last resort, Citizens, has seen a dramatic increase in AOB litigation on water damage claims over the last five years, particularly in south Florida. This year it raised rates by 6.4 percent because of AOB abuse and saw a $27 million net loss, its first loss since 2005.

The rest of the Florida insurance industry is also reporting an increase in AOBs and litigation and has stopped writing in certain zip codes in addition to raising rates. The Florida Office of Insurance Regulation approved 73 percent of the rate increases filed by insurers writing property insurance in the state this year, increases largely attributed to AOB claims.

Insurance representatives are now expecting the Florida market will face a property insurance affordability and availability crisis.

“Without reform, consumers will continue to be taken advantage of by scam artist vendors and lawyers, and insurance rates will continue their upward march in response to exponentially rising claims costs,” said Liz Reynolds, State Affairs director, Southeast Region, National Association of Mutual Insurance Companies (NAMIC). “‘Hurricane AOB’ will rage on.”

“This is the fifth year of our effort to address AOB abuse and related litigation, and we are again disappointed by the Legislature’s failure to pass meaningful reform to benefit consumers,” said Michael Carlson, president of the Personal Insurance Federation of Florida. “What will result is another year of potential insurance rate increases driven by increases in the cost of non-catastrophe AOB claims.”

Reform advocates say they will not drop the AOB topic just because Florida legislators did, and now have their sights set on the 2018 session to get something done.

“We intend to let homeowners know that the pain they are experiencing in their pocketbooks is the direct result of legislative inaction, and we will fight hard again for reforms when the Legislature reconvenes in January,” Ousley said.

“We hope that the passage by the House of HB 1421 will give us a renewed opportunity for discussion of the issue as we approach the 2018 Session which begins in January,” said Carlson.

Related:

• Florida House Advances Bill Targeting Claims Abuse, But Senate Battle Looms
• Florida Senator Alleges ‘Smear Campaign’ After Industry-Backed AOB Bill Stalls
• Top Florida Stories of 2016: The AOB ‘Insurance Crisis’
• Florida’s AOB Abuse by the Numbers: ‘Alarming Trend’ Reaches Crisis Point
• Florida’s Citizens to Lawmakers: AOB Reform Must be Passed in 2017
• Florida Fights Back Against Assignment of Benefits Abuse
• Florida’s Citizens Says AOB Abuse to Blame for Statewide Rate
• First Florida Bill Addressing AOB Introduced for 2017 Session
• Report: Florida Water Loss Claims up 46 Percent in 5-Year Period
• Citizens Posts Net Loss of $27M for 2016; Says Water Losses, AOB to Blame
• Citizens Seeks Florida Agents’ Help Fighting Water Claims Abuse
• Heat Is on Florida Lawmakers to Fix Assignment of Benefits Crisis

Topics Lawsuits Florida Carriers Claims Legislation Property