.
So despite all the rhetoric about fraud, it looks like it is just that, rhetoric. Nothing seems to be happening at least on the most recent alleged water loss frauds from a law enforcement perspective. So my question of the day–how do you catch a water loss fraudster? If you read this link Assignment of Benefits Insurance Reform Fact Sheet from the Personal Insurance Federation of Florida, you will get some sense of how big the problem really is. Note the last paragraph, which talks about other property insurance crises. As we all know, the fix in some of those matters were to remove the peril from coverage. Since water losses are the most frequent cause of claims and can be extremity damaging, it would be a very bad thing to see this peril shifted to property owners. My guess is that if you took the one-way attorney fees out of the mix for Assignment of Benefits (AOB) or limited them the water, AOB would go away. As you can read in the court case below this judge reversed the attorney fees.
Here, a court in Florida with shall we say an engaged judge, may have found a way, albeit costly. Please take the time to read this recently published court decision dealing with Assignment of Benefits .
It seems to me the AOB, which in my view is nothing short of a huge moral hazard, is playing a big role in the water loss controversy. I was told by one industry insider that most of the new carriers would not fight all these small lawsuits and they would just pay the demand and raise the rates to their customers to compensate. This person said this case likely would not have gone to trial but for the financial standing of the defendant. The new smaller companies would have just paid and adjusted their rates to their customers.
Finally, last week I had a phone conversation with a national insurance carrier representative who was headquartered out of state. In the course of the discussion about a shockingly large “emergency service” bill that had been submitted on a commercial fire we were attempting to settle, this gentleman started telling me about all the lawsuits they were getting from Florida based on the standing that contractors have with AOB’s written into their contracts. He said some of the suits had no merit since there was no coverage in the insurance contract. It seems this company is trying to come to grips with this and have set up a special unit to deal with AOB lawsuits.
So on one hand we have the good news of Citizens depopulation that must be tempered with the bad news of even higher homeowner and commercial rates coupled with insurance policy restrictions on Floridians to recover for losses that otherwise may be covered in other states. Add the invasion of untested newbie insurance carriers with the lack of will, knowledge or maybe resources to crack down on the alleged fraud in order to preclude rate hikes in the effected Florida counties and that sums up our present situation.
In closing, if the Florida legislature does not deal with the AOB issue, I have been advised that some carriers will undoubtedly change their contracts as I am told some E&S carriers are now looking at doing.
This is an important issue. Let us know what you think!