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Abuse of the System by a Few Could Cost Everyone

by | Apr 7, 2017

A new coalition in Florida is directly blaming certain lawyers and shady contractors for rising home insurance rates.

The Consumer Protection Coalition, (which is a self-described ” broad-based group of business leaders, consumer advocates, real estate agents, construction contractors, insurance agents and insurance trade groups”) says the complicated issue of Assignment of Benefits fraud  will literally cost everyone in the state, so they are taking the fight to directly to lawmakers for relief.

“Make no mistake: If the Legislature fails to address the growing cancer of AOB for a fifth straight year, Florida’s hardworking families are the ones that will lose.  Our leaders have crystal clear evidence that AOB fraud and abuse is threatening the affordability of homeownership for average Floridians.  For lower-income families and those on fixed incomes, it could literally put the dream of homeownership out of reach,” said Dulce Suarez-Resnick, independent insurance agent in Miami.

AOB is when an insurance policy holder signs their policy over to a home contractor working with an attorney to get the repairs to their homes done.

According to the CPC, a policy owner is talked into signing away their policy benefits by a shifty contractor working with an attorney so home owners repairs happen faster.

“I’ve seen first-hand the AOB abuse that’s happening in our neighborhoods and reform is urgently needed,” said Ralph Davis, a roofing and construction contractor. “AOB fraud and abuse is driving up the costs of home repairs and is hurting homeowners who are often unaware of the risks they face when they sign an AOB.”

A frustrated Davis adds “Our legislators have heard testimony of plumbers getting paid kick-backs of as much as $2,500 to get a water remediation firm in the door to convince a homeowner to sign an AOB. That’s just plain wrong.  Florida homeowners don’t need to sign an AOB with a contractor to get repairs done, and roofers and other contractors don’t need AOBs to get paid.  The system that has been in place for years – having homeowners direct their insurers to pay us under their policies – has worked.”

According to state-run Citizens Property Insurance, AOB fraud is hitting Citizens, hard.

Citizens say 96 percent of all litigation it faces comes from Dade, Broward and Palm Beach counties.  In less than four years, Citizens has seen the average payout from each litigated water claim increase from $10,000 to $20,000.  In 2011, only 12 percent of the claims Citizens received ended up in court.  By 2015, 45 percent have gone before a judge.

“A cottage industry of trial attorney firms, often partnering with a relatively small group of home repair vendors, are driving the vast majority of lawsuits against Citizens,” said Barry Gilway, president and CEO of Citizens.  “This year, 84 percent of our policyholders will see rate increases, because of this water damage claims and AOB litigation phenomenon.  Without significant statutory reforms, Citizens will be forced to pass these costs on to our customers in the form of higher rates for the foreseeable future.”

A report was release by the Florida Justice Reform Institute that breaks down the AOB issue. You can read it here.

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