Officials look to fix claim abuses

State: Reforms needed to stop Citizens rate hikes

Banking and insurance panels from the state Senate and House will kick off this year’s efforts to solve the “assignment of benefits” problem that home insurers say will trigger annual insurance rate hikes for South Florida homeowners indefinitely if not resolved.

This year will likely be the fifth straight year lawmakers will file at least one bill that would attach strings to contractors’ ability to “stand in the shoes” of policyholders when seeking payment for repairs.

Claims costs have skyrocketed in recent years, insurers say, from increased lawsuits over nonweather-related water emergencies, mostly stemming from Miami-Dade, Broward and Palm Beach counties, that begin with contractors convincing policyholders to sign over the right to their policy benefits as a condition of beginning repair work.

So far, all of the bills died after insurers and trial attorneys failed to agree on reforms.

Prospects for ending the standoff over “assignment of benefits” reform seem stronger this year, said Paul Handerhan, senior vice president of public policy at the Florida Association for Insurance Reform, a statewide industry watchdog group based in Fort Lauderdale.

“A number of reforms are needed,” Handerhan said Friday. “The longer the problem exists, the longer rates will continue to go up.”

Citizens and other insurers blame abuses for premium hikes over the past two years. They point to a handful of law firms, mostly in South Florida, that routinely file hundreds of lawsuits accusing insurers of offering too little or denying responsibility altogether for claims.

Under current law, those law firms can force insurers to pay all of their legal invoices if the insurers agree to settle the claims for as little as $1 over the amount initially offered.

In a legislative wish list released in December, Citizens proposed prohibiting attorneys from seeking legal fees if they are representing contractors working under assignments of benefits.

Other reforms sought by Citizens include requiring a written estimate of work to performed under an assignment, requiring a copy of the assignment to be furnished to the insurer within three days after it is signed, limiting assignments to just the work being performed and not the whole claim, and enabling consumers to rescind agreements. In addition, Citizens wants to prohibit fees in assignments for check processing, overhead, profit or cancellations, and wants bar contractors from being able to place liens on properties for work completed under assignments and paid for by insurance proceeds.

Handerhan predicted that enough support exists to push through some reforms during the legislative session that begins in March.