A state law that was originally intended to give individual policyholders special rights in disputes with their insurance companies is instead being used by some repair vendors and their lawyers to generate a self-serving windfall. The problem is serious and growing, and it’s driving insurance costs higher and higher.
The so-called “one-way attorney fee” allows a policyholder to collect their legal fees from their insurer if they win a claims dispute. But, if the policyholder loses in court, they don’t have to pay the insurer’s legal fees.
Some repair vendors, though, are tricking policyholders into signing an assignment of benefits or AOB. This allows the vendor to seize control of the policyholder’s special rights, file a claim and sue the insurer, often without the policyholder’s knowledge or consent.
Now, this litigation-for-profit scheme has become an incentive for lawyers and their vendor clients — often water damage remediation firms, roofers, or auto glass shops with aggressive marketing schemes — to clog the courts with lawsuits and generate big paydays for themselves.
Recently, the Florida Justice Reform Institute revealed how the growing use of AOBs and the one-way attorney fee by third parties is increasing litigation and costs.
Using the Florida Department of Financial Services’ service of process database, we discovered some startling insights.
From 2000 to 2016, Florida’s population increased 26 percent, while total litigation filed against insurance companies increased about 280 percent.
In particular, AOB litigation increased by over 66 percent from 2010 to 2011, fell briefly after the 2012 auto insurance reforms, and then started rising again. From 2014 to 2015, AOB litigation increased 10.7 percent, and then 21 percent from 2015 to 2016.
AOB lawsuits initiated by vendors who provide water cleanup, restoration, drying, mitigation, mold detection, or remediation services were overwhelmingly concentrated in Palm Beach, Broward and Miami-Dade counties. On average, these three counties produced more than 80 percent of litigation from these vendors in 2014, and that share rose to nearly 85 percent in 2015, and nearly 89 percent in 2016.
Unfortunately, the problem is not just confined to home insurance claims. Auto glass claims also saw a staggering increase — over 3,000 percent in five years — from 591 claims in 2011 to 19,558 claims in 2016.
But the most surprising discovery was that nearly 25 percent of all AOB cases — from property to auto to auto glass — filed in Florida between 2013 and 2016 were filed by just 11 lawyers.
The bottom line is that all this rampant AOB abuse and litigation is driving insurance costs up. Insurance Commissioner David Altmaier had it right last month when he told the Governor and Cabinet that there’s no other explanation other than the one-way attorney fees.
The Florida Legislature has strong data supporting this growing problem. It’s time for them to pass meaningful reforms and stop a handful of unscrupulous repair vendors and their lawyers from using the policyholders’ special rights for their own benefit. Keep consumers in control of the insurance policies they bought and paid for, and stop the abuse that’s sending insurance rates higher.
William Large is President of the Florida Justice Reform Institute.
The Florida Justice Reform Institute was created in 2005 to fight wasteful civil litigation through legislation, promote fair and equitable legal practices and provide information about the state of civil justice in Florida. Visit fljustice.org for more information.
March 20, 2017 at 3:02 pm
Sir while I find your article factual it is very one sided. I can excuse this as there are facts that apply to the issue, particularly in the auto glass business, that I believe you are not aware . What you are unaware of is that pricing for auto glass repairs are done by a national firm known as N.A.G.S. This is a guideline that ALL insurance companies and Glass companies that bill them use. The majority of insurance companies follow these guidelines to the letter. However, if you look closely at the filings against insurers you will find that a certain group are the ones being sued. These specifically include for instance Geico and USAA to name some for your research. These companies have aligned themselves with Safelite. To make you aware Safelite not only do installation but they act as the third party administrators for a lot of the larger companies. They are the ones that are actually answering the phones on windshield claims! They dictate the price that they say should be paid by discounting from NAGS. They have convinced these companies in our market that the install is generally 50% off of NAGS. In 2010 the discount off NAGS was about 28-35%. They continue to increase the discount as cost rise! In every deposition can no one with the insurance companies come up with the market data to justify this pricing. It is done to drive business to Safelite as with their economy of scale they can do installs at lower prices. However their pricing to the insurance company is actually different than what they have “placed” on the market. (Another subject.)
The pricing that they want us to accept is in many cases lower than our cost of goods and overhead. In other words we actually lose money. The only way to make them accountable is to arbitrate these claims. If you look carefully you will find that many suits have been dismissed as the insurers are negotiating pricing that makes sense for all. This is only happening because of the legal system. It is the only way to make them accountable. Trust me we would rather wait 30 days for a reasonable price than 4 years for a settlement.
You are welcome to contact me for more in-depth information. I am the owner of a auto glass shop.
Thank you for the forum to set the record straight and look forward to speaking with you.
Comments are closed.