The Continued Debate Over Assignment of Benefits Insurance Reform

Q: Is Assignment of Benefits Abuse Leading to A Downgrade in Insurers’ Financial Stability Ratings?

Florida property claims attorneys have squared off against Insurance companies and watchdog groups in a long-standing battle over assignment of benefits reform. Especially with respect to the high volume of non-weather related water emergency claims which are driving insurance rates upward.

Assignment of benefits (“AOB”) refers to homeowners signing over the benefits from their insurance policies to contractors they’ve hired to make the repairs. Instead of the widespread practice ensuring claims are paid properly, critics say the AOB system is rife with abuse and fraud. The broken system and the cost of resultant lawsuits over disputed claims is driving insurance rates higher.

On the flipside, insurance litigation attorneys support the AOB practice as a means to protect homeowners against unreasonable delays or denials of claims made by insurers. Without the protections currently in place, homeowners would be at the mercy of insurers not paying their claims. In addition, they may be unable to afford to either bring a lawsuit or to wait until the suit was resolved for the needed repairs.

As we have been following on this blog, in cases where homeowners have to sue their insurer over disputed claims, they may recover their attorney’s fees if the lawsuit settles for even one dollar over the sum the company originally offered the homeowner as payment of the claim. This is a vital right which insurance claim attorneys are committed to preserving while being open to addressing potential abuse by “unscrupulous contractors”.

Despite these long-standing debates, lawmakers have not agreed to change the law. But a new development has some lawmakers potentially reconsidering.

As a result of” skyrocketing losses” from AOB water damage claims, the financial stability rating of 10 to 15 Florida property insurance companies may be reduced from A to B- – jeopardizing the mortgages of thousands of homeowners of federally-backed mortgages like Fannie Mae and Freddie Mac. While no companies are reportedly in danger of failing, AOB critics claim the downgrade would impact 20 to 30% of the Florida market and could force homeowners into Citizens Property Insurance Corp., “the state-run insurer of last resort”.

In Florida, AOB lawsuits “exploded” in the past 10 years rising “from 405 in 2006 to 28,000 into thousand”.

The downgraded financial stability rating issue is the latest argument in favor of AOB reform. The debate goes on.

If your insurance company is not acting in good faith, won’t return your calls, or has denied your claim, you need the help of an experienced Florida insurance claim attorney.

Call Jeff Pekar, Esq. at Pekar Law, P.A. for a free consultation. We serve clients throughout Florida, including but not limited to the Tampa Bay area, Naples, Fort Myers, Orlando, Daytona Beach, and Pensacola.