Florida Property Insurance Legislative Wrap 2015 - We made it through another year unscathed or did we?
It may be no surprise that not a lot of bills were filed in this year’s legislative session to correct any real or imagined property insurance crises and those that were, died in various committees. After all, we are fast approaching a decade of no major hurricane strikes that some are saying is a record going back over hundred years! The sitting duck we were supposed to be is looking more like a stuffed bird hung on the wall. Yes, I know it only takes one, but let’s hope the good times continue to roll. There is too much at stake to see Florida or any of our coastal neighbors hit with the big one in this year’s 2015 Atlantic hurricane season just as we are in full recovery mode from the great recession.
As to the bills that were filed, two issues stand out for me that deserve some comment. The first is the assignments of benefit, also known as the AOB controversy. I simply don’t understand why the Florida Legislature doesn’t get that this practice of an “assignment of benefits” is just a bad idea. Think about it. Are we comfortable allowing some folks to hijack a property insurance policy they did not pay for nor the insurance company agree to them being a de facto insured with a simple signed piece of paper? And yes, I am well aware of the ability to assign a claim post loss, but not the whole policy! Take a look at one AOB language found in a just released Florida appellate court decision:
“I, the Owner, hereby assign any and all insurance rights, benefits, and proceeds under any applicable insurance policies to One Call. I make this assignment in consideration of One Call’s agreement to perform services and supply materials and otherwise perform its obligations under this contract, including One Call’s not requiring full payment at the time of service. I intend to transfer all insurance rights to One Call, including any causes of action, which exist or may exist in the future.”
I don’t know about you, but the “transfer all insurance rights…including any causes of action which exist or may exist in the future” is more than a little scary to me.
The three Fourth District Court of Appeals cases on this issue can be read in their entirety by clicking on the links below. Specials thanks to Nancy Dominguez, FAPIA Director, for bringing these to my attention in a “hot of the press” memo on 5/21/2015.
DCA1 DCA2 DCA3
As you can read in the three Fourth District Court of Appeals cases above, the court kicked the can back to the trial courts and the long expected AOB reforms from the appellate court did not materialize as was widely expected by the insurance defense attorneys. While the AOB issue is far from over, I find it interesting that in one case the court said:
“Turning to the practical implications of this case, we note that this issue boils down to two competing public policy considerations. On the one side, the insurance industry argues that assignments of benefits allow contractors to unilaterally set the value of a claim and demand payment for fraudulent or inflated invoices. On the other side, contractors argue that assignments of benefits allow homeowners to hire contractors for emergency repairs immediately after a loss, particularly in situations where the homeowners cannot afford to pay the contractors up front. Our court is not in a position, however, to evaluate these public policy arguments. There is simply insufficient evidence in the record in this case—or in any of the related cases—to decide whether assignments of benefits are significantly increasing the risk to insurers. If studies show that these assignments are inviting fraud and abuse, then the legislature is in the best position to investigate and undertake comprehensive reform.”
So my money is betting that since this issue has been boiled down to a matter of “public policy,” the next Florida legislative session will again take up AOB -- especially if the legislature gets a grip on the court’s statement.
The other key issue I want to address is the need for licensing, and some type of regulation and control of the appraisal process. More specifically, this regards people who are holding themselves out as appraisers and umpires. Bills were filed this year to attempt some type of reform in a process viewed by many as out of control. But again, they failed to gain any traction and we are back where we started with appraisal. Well, not really back to where we started, as appraisal, which was once widely available to the policyholder to resolve disputes about the amount of loss and damages has for the most part been eliminated in Florida policy forms.
Unfortunately, this process was so widely abused after the 2004 - 2005 hurricanes that most insurance companies took it out of their policies. It’s my belief that the AOB and appraisal problem share the same DNA. Anybody can get an AOB signed and that same anybody can be an appraiser and umpire. Again, that moral hazard argument comes to mind when thinking about the potential abuse unlicensed and unregulated folks can create with these two unchecked weapons in unscrupulous hands.
While I will be the first to say that regulation and oversight in the Florida insurance claim side of things is lacking and in need of better enforcement of the existing rules and regulations, the appraisal side is in dire need of some type of oversight and control. If there were simple things like continuing education requirements, coupled with a licensing requirement, it’s my belief these reforms would weed out many of those who have no business acting as appraisers or umpires.
The Windstorm Insurance Network has established a model that could be built on to help reach the goal of providing a resource of trained professional folks in this area of dispute resolution. Take a look at some of the good work the Wind Credential Programs in this area. The umpire and re-certification umpire classes are completely full at the annual conference and if you look around the room, you’ll see why. These folks are professionals and care about their reputations.
Things like certification, and then re-certification to achieve a professional designation would go a long way coupled with a peer review committee for complaints to be submitted and heard by a fair and impartial panel may help bring back the appraisal forum.
Also, by taking appraisal out of the policies, this forces the policyholder to get an attorney and guess what? Yep, the cost to the policyholder goes up in terms of attorney’s fees, and litigation costs that drive up premiums for all of us. And yes, the appraisal scheme still works except now to go to appraisal you have to have an agreement crafted by lawyers. We are actually seeing insurance companies asking for an appraisal after a lawsuit is filed even though it is not in their policy.
But the way things are now, the policyholder who wants their claim settled in a resolution dispute forum are out of luck unless they want to incur legal fees to get matters of loss and damages settled in appraisal. My view is that with the exploding legal costs insurance companies are paying due to a lack of an appraisal clause, they would agree to return the appraisal process into their policies if there was some assurance that the rogue cowboy appraisers and in some cases umpires are taken out of the mix. Who could argue with that? Hope everyone has a wonderful Memorial Day Weekend and God Bless America.