The use of an Assignment of Benefit form is not new to the insurance industry and in most instances accomplishes what it was intended to accomplish, but in the State of Florida some unscrupulous attorneys and contractors have taken a good thing for consumers as a way to enrich themselves.
The concept of Assignment of Benefit (AOB) was intended to streamline the handling of a home or auto repair claim. It was intended to speed up repairs and cut some red tape for the consumer. Unfortunately, some contractors and attorneys have used this as a way to run up expenses and to make unnecessary repairs which they then charge the insurance company for.
Florida’s law allows that if an insurance company challenges the contractor’s bill and loses the case, it must still pay its own legal costs and the plaintiff’s costs. If it wins it must still pay its own legal costs, setting up an unfair one-way reimbursement of legal fees in favor of the plaintiff’s attorney.
This certainly is a win win situation for trial attorneys. All they have to do is encourage a contractor whose bill has been challenged by an insurance company to turn it over to them and let them litigate it in their behalf.
An insurance company has to weigh paying of the extra costs against the cost of prosecution in deciding what to do. It becomes a matter of economic scale, but in any case the costs will be passed on to consumers in increased premiums. It is reported that AOB property claims have increased in Florida from 405 in 2006 to 28,000 in 2016. It is fairly obvious what direction the insurance companies have chosen to follow.
In 2016 Senate Bill 1038, which would have fixed the problem, was introduced but failed because politicians let it die in committee. Makes you wonder how many legislators are attorneys who are more concerned about their own pockets as opposed to doing the right thing for their constituents.
Apparently, the Legislative session, which began Feb. 9th, 2018, will have another chance at reforms which would stop insurance claims abuses. Hopefully we can have an update later on.
(Comments based on article “Florida’s AOB abuse by the numbers. ‘Alarming trend’ reaches crisis point. Amy O’Connor, Insurance Journal 2/17/2017)