Originally published by Sun-Sentinel |
A new front has opened in the ongoing battle between repair contractors and the insurance industry, and this time ground zero isn’t South Florida.
Lawsuits between independent auto glass repair businesses that replace cracked and broken windshields and auto insurers that pay for them have increased dramatically over the past 10 years, and insurers are blaming the “assignment of benefits” tool, saying abuses could drive up rates for all drivers.
Insurers accuse the auto glass companies of committing fraud, while the auto glass companies say the insurers refuse to pay a fair price for their work.
In 2006, auto glass companies, acting as assignees of auto insurance policyholders, filed 397 lawsuits against auto insurers statewide. In 2016, that number had swelled to 19,695. Most of those suits were filed in the Tampa-St. Petersburg region, but the numbers are increasing in Broward, Palm Beach and Miami-Dade counties.
In the period between Jan. 1 and Aug. 17, just nine suits were filed in 2012 in the tricounty region by companies with the words “glass” or “windshield” in their names, according to a state database of lawsuits against insurers. By comparison, 978 were filed during the same period in 2016, and 1,067 were filed during the same period this year.
South Florida policyholders should be familiar with the phrase, “assignment of benefits.”
That’s the affidavit blamed for skyrocketing property insurance rates here. Insurers say water damage restoration companies use them to coerce policyholders into signing over benefits of their claims so they can overbill the insurers and file suit if the insurer underpays or denies the claim.
The scheme is fueled, insurers contend, by trial attorneys motivated to collect “one-way attorneys” fees. Those are fees that plaintiffs attorneys collect if insurers lose or settle for any amount over their original offer.
Plaintiffs attorneys working under assignments aren’t at risk of paying one-way fees. That’s because one-way fee laws were created to enable policyholders to sue their insurers without the risk they would be forced to their insurers’ legal fees if they lose.
Florida Insurance Commissioner David Altmaier raised the issue of increased litigation from auto glass companies in a meeting with Gov. Rick Scott and the Florida Cabinet last week.
“The only good news,” he said, is the issue isn’t driving up auto insurance rates like the property insurance litigation because the disputed amounts over windshield replacements are significantly lower.
Just about all windshield-related suits are filed in county courts or small claims courts, where claims amounts are less than $15,000.
Statewide, a quarter of the suits were filed by Auto Glass America, an Arizona-based chain based with locations in the Tampa and Jacksonville areas.
Like other companies, Auto Glass America advertises incentives for customers who come to them for a free windshield replacement — if they have qualifying insurance. Florida law requires auto insurers to replace broken windshields without charging a deductible for customers with comprehensive insurance.
As a result, independent auto glass companies have become more aggressive soliciting business, including setting up shop at car washes and gas stations and persuading customers to sign over insurance benefits on the spot, insurers say.
Auto Glass America’s website offers up to $100 cash back and a $100 discount card from Restaurant.com.
Two companies, Same Day Windshields and AmeriPro Auto Glass also offer $100 back to Florida policyholders.
“Fraudsters often approach consumers in a friendly manner with offers of waiving deductibles, cash rebates, gift cards or even steak dinners,” asserted Logan McFadden, southeast region spokeswoman for the Property Casualty Insurers Association of America, in an email statement. When it comes time for the glass companies to file suit, they often do so without notifying policyholders named in the suits as assignors, she said.
Logan’s organization, Altmaier, and major insurers are urging the state Legislature to adopt laws restricting assignees from collecting one-way attorneys fees, even though a similar effort failed last year.
But Lee Jacobson, an Orlando-based attorney who sued insurers over windshield claims 900 times in 2016 and 546 times so far in 2017, disagrees that assignment of benefits or one-way attorneys fees are driving the trend.
Jacobson blames the nation’s largest auto glass replacement company — Ohio-based Safelite. He says Safelite cornered the market by negotiating high-volume, low-cost windshield replacement rates with the largest auto insurers. In turn, the largest insurers use those low negotiated rates as benchmarks in determining how much they are willing to pay independent auto glass shops, he said.
Safelite can afford to take lower rates, Jacobson said, because they also operate claims administration services for the major insurers and in that role deal directly to independent shops seeking reimbursement.
“Seventy percent of lawsuits I file is because the bill is completely ignored months after they receive it,” he said. “Thirty percent of the time, we send the bill for $500 and Safelite sends us a check for about half of it.”
Many insurers today that used to reimburse at 15 percent less than the going retail rate for windshield replacements now want to pay just half the retail rate, Jacobson said.
Scot Zajic, vice president of legislative affairs for Safelite, said Safelite has contracts with major insurers including Geico, Progressive, USAA, and Allstate to handle claims processing, including taking initial calls from policyholders, for auto glass and other types of claims.
But Safelite plays no role in deciding how much insurers are willing to pay the auto glass companies, Zajic said.
“Safelite does not adjust claims,” he said. “If you go to XYZ glass shop, we will tell you, ‘This is what your insurance company will pay.’
“The process we use has created efficiencies. So all consumers win because the cost of managing claims has gone down.”