Originally published by Sun-Sentinel |
Now it’s the attorneys’ turn to pitch their version of insurance claims reform.
Freshman state Sen. Gary Farmer, a Fort Lauderdale-based attorney and former president of the trial attorneys’ trade organization Florida Justice Association, is offering an alternative to a bill supported by the insurance industry that would bar trial attorneys from collecting fees in thousands of lawsuits against insurers.
Farmer’s bill, filed last week, would not prohibit attorneys from collecting legal fees if they represent repair contractors working under an assignment of benefits.
But it would give insurers some of what they want:
• Notification of assignments [although within seven days and not three]
• At least a 10-day notification to insurers of any pending lawsuit by contractors
• The right by policyholders to rescind assignments
• A statement of the scope of work to be performed included with assignments
For a fifth-straight year, Florida’s property insurance industry is asking the Legislature to help it cut claims losses.
Led by state-run Citizens Property Insurance Corp., insurers say water damage claims are forcing rate increases that could soon make insurance unaffordable for homeowners.
They blame about a dozen South Florida law firms who they say are in league with “bad actors” in the water damage restoration business.
Insurers say repair companies coerce policyholders into signing over benefits of their policies, send inflated bills to insurers while “standing in the shoes” of homeowners, then sue if insurers deny or try to underpay claims.
If a settlement exceeds an insurer’s original offer, the insurer must pay legal fees under a “one-way attorney fee” law that was originally intended to give policyholders a fair shake in disputes with deep-pocketed insurance companies.
Increasingly, insurers don’t learn about claims until served with lawsuits, they say.
Insurers have tried to choke off the cash flow by seeking to control homeowners’ ability to assign benefits. But Florida courts have repeatedly affirmed policyholders’ assignment rights, and plaintiffs’ attorneys last week predicted courts would also strike down the insurers’ latest proposal to restrict one-way attorneys fees.
Farmer said his bill strikes a balance by requiring notice of claims to insurers before suits can be filed, while protecting policyholders’ rights to choose a repair company and sue if insurers fail to pay up. “I just don’t believe eliminating assignments or changing the attorney fee statute is the right way to do it,” he said.
If insurers had their way, they would require policyholders to accept work by repair companies only they select, Farmer asserted. “And that’s not fair. We all know what happens. Preferred vendors tend to side with insurance companies’ [cost estimates] or give low-ball estimates so they can get more work with the companies.”
Beyond excluding the one-way attorney fee restrictions, Farmer’s bill differs from the insurers’ bill in several other ways:
• The bill does not dictate what contractors should include in their scope-of-work submissions. The insurers’ bill requires “written, itemized, per-unit cost estimate” of the work to be performed. Farmer said those requirements enable an insurer to play “gotcha” and deny any expense not included in an estimate.
• The insurers’ bill prohibits any assignment from imposing penalties or fees against homeowners, including an assignment rescission penalty or a mortgage or check processing fee. Farmer’s bill does not.
• The insurers’ bill requires notification of assignments to insurers within three business days. Farmer’s bill allows seven.
• Unlike the insurers’ bill, Farmer’s bill would not require assignees to comply with responsibilities required of homeowners, including submitting to “examinations under oath and recorded statements conducted by the insurer.”
• Farmer’s bill would also require state licensing of water restoration contractors and require all work performed to current and accepted industry standards. The insurers’ bill does neither.
Asked to comment on Farmer’s bill, Citizens spokesman Michael Peltier said company officials are reviewing it.
But in a statement, Carolyn Johnson, spokeswoman for the Florida Chamber of Commerce, said the bill “appears designed to protect the water restoration industry at consumers’ expense and doesn’t get to the heart of the issue … which is the explosion of Assignment of Benefits lawsuits that is driving up insurance premiums and threatening the affordability of homeownership in Florida.”
Johnson said the chamber’s Consumer Protection Coalition opposes any bill that would impose penalties for rescission of assignments, and believes “any effort to reform AOB abuse should eliminate one-way attorney fees which are the fuel that allows profiteering attorneys to file thousands of lawsuits against insurance companies without financial risk.”
But Florida Justice Association spokesman Ryan Banfill called Farmer’s bill “a step in the right direction,” adding it “protects consumers and their rights” while it “gets at the heart of the concern expressed over the four-plus years that we’ve seen issues with those taking advantage of the system.”