Make no mistake about it, the assignment of benefits controversy as evidenced by its reported abuse in the property insurance arena in the last decade has to have been one of the top scams I have witnessed in my 46-year career. And to top it off, it was all legal, albeit I would guess at times a bitter pill to swallow for some of those engaged in the activity, but what the heck, it was clearly profitable.

But as the lawsuits kept rolling in, someone in Tallahassee got the memo out to the legislature and the AOB reform bill was passed by both houses of the Florida legislature and the Governor. Just like that business models of a lot of practitioners changed overnight. One attorney I heard speak recently said 30% of his firm’s business will be gone. Other law firms will likely have to reshuffle the deck to make up their lost revenue stream. Same for the contractors and emergency service firms who were abusing this legal concept. 

So how bad was the AOB abuse? The Wall Street Journal published an article in their editorial page a few weeks ago titled “Florida’s Eye of the Lawsuit Storm.”  In this article, they report that AOB law suits have increased from 79,000 in 2013 to 135,000 last year. Car insurance premiums have also increased with “Florida drivers paying 50% more than the national average.”  Why car insurance?  Well it seems that auto glass replacement firms were also using the AOB model to assert claims for what they felt were under payment of windshield replacements. Unfortunately, auto glass escaped reform in the final bill.

Make no mistake about it, insurance companies are not always little angels.  In fact, if properly staffed, they could have avoided a lot of the AOB claims by simply providing timely service with in person inspections on the front end of a loss with agreements reached on scope and price of the covered loss. I have always said the insurance industry is their worst enemy. Reduced staff and cutbacks on service is a prescription for the disaster (and higher premiums) which is what we have been reading about ad nauseam over the last few years.

So, what will happen now that some AOB reform is on the books? I am doubtful that restoration contractors, plumbers, and others who in the past were called out to fix your property will stop taking your calls, nor will other providers such as hospitals or physicians cut back or refuse to provide services (remember in most cases you are giving an assignment of benefits to medical providers so they can charge your insurance company, not you in a time of crisis) when your access to money may be limited.

But like most new legislation, unintended consequences will likely pop up. Since this reform will have the biggest impact on the legal profession, it wouldn’t surprise me if lawsuits will be filed to challenge this legislation on some theory that your right to go to court has been eliminated or reduced.

As for vendors providing services to repair your property, my guess is that the old Direction to Pay forms will be resurrected. Those worked very well, when I was on the carrier side, so we will see what’s next. But my guess is that in the short run and hopefully the long run lawsuits will dramatically drop like a rock.

Finally, like most pieces of new legislation, it is critical that the language in the new AOB law needs to be read in its entirety. Remember, the devil is always in the details, so check out some of the carve outs in this AOB reform bill. As you will read, the AOB concept has not totally gone away, it has been reformed to hopefully take the moral hazard out of what had become in a lot of cases legalized fraud.

Closing on a positive note, the earth did not shake when the Governor signed the bill, and my guess is that we may see some insurance premium reductions or at least not the projected increases the pundits were predicting if the status quo of the AOB forms remained in place.