AOB Reform Still Alive as Session Enters Stretch Run
The Florida Legislature is in the final month of its annual 60-day regular session. This year’s session concludes May 3. For many who follow Florida’s residential property insurance market, the question this year is the same as in recent years— is this the year assignment of benefits (AOB) reform will pass?
Floridians throughout the state are seeing the impacts of AOB abuses, either in the form of increased premiums or reduced choices in the market. The adverse impacts are not new, and the legislature certainly has had plenty of opportunities to consider those adverse impacts in prior years. However, the legislature continues to show more interest in AOB reform this year. This might be due to new participants in the process, or it might be due to the issue’s becoming so significant that it is no longer viable to defer taking action. Either way, we enter the final weeks of the session with reform proposals still advancing through the process.
A proposal pending in the Florida House of Representatives is poised to be sent to the floor. The proposal would require an assignee to notify the insurer of its demand, with supporting documentation, at least ten days before filing suit. The insurer then would be required to respond with a settlement offer or by invoking appraisal or other alternative dispute resolution mechanisms in the policy. The difference between an assignee’s demand and the insurer’s offer is known as the “disputed amount.” Unlike current law providing a one-way right of attorneys’ fees against the insurer, the House proposal would allow either party to recover attorneys’ fees depending on the outcome of litigation. If the amount of a judgment does not exceed the insurer’s presuit offer by at least 25%, the insurer would recover its attorneys’ fees. A judgment for an amount 25-50% greater than the presuit offer would result in no award of attorneys’ fees to the parties. The assignee would recover its attorneys’ fees only when obtaining a judgment that is at least 50% more than the presuit offer.
The House proposal also could affect the policy forms insurers offer. An insurer would be allowed to “make available” a policy that restricts assignments as long as the insurer also makes available a version of the policy that does not restrict assignments. The version restricting assignments would need to cost less than the version with no restrictions. In addition, the insurer would be required to obtain written confirmation from the insured that he or she is knowingly rejecting the version that does not restrict assignments.
The key provisions of the proposal would take effect as early as July 1, 2019. Of course, there’s still a lot of work to be done as the House proposal heads for action on the floor and eventually would need to be reconciled with differences in the Senate’s approach. Although AOB reform remains far from certain this year, the legislature’s continuing efforts to find a solution gives us a reason to be a little more optimistic this year than in the closing weeks of prior sessions.