Assignment of benefits bills gaining traction in state legislature

March 23-- Mar. 23--PANAMA CITY -- Wilson Ellis has seen people give control of their insurance claims to contractors and got their homes repaired faster. He's seen others do the same, only to lose their insurance money without any home repairs.

"I can see both sides of the issue," said Ellis, co-owner of S&S Contracting Services in Panama City. "It's good in certain situations ... but you can get upside down on those things."

The insurance practice Ellis referred to, known as assignment of benefits or AOB, while controversial for years, has gained notoriety more recently in Bay County and other counties hit hard by Hurricane Michael. In response, two bills to restrict the practice have made headway in the state Legislature. Supporters of the legislation have argued that some contractors and attorneys abuse the assignment of benefits process, raising insurance costs. Opponents say the practice helps keep insurers from lowballing clients and doesn't raise costs as alleged.

Separate bills have moved through state House and Senate committees in recent days to restrict assignment of benefits -- a practice that lets homeowners sign over their insurance benefits to contractors, who can then obtain money directly from insurers.

The House Insurance and Banking Subcommittee on Tuesday approved House bill 7065, which would limit attorney fees in assignment of benefits disputes. The Senate's version of the bill, SB 122, passed through the Senate Judiciary Committee on Monday. The Senate bill would restrict attorney fees and add payout limits when assignment of benefits are used for emergency home repairs.

Jeff Grady, president and CEO of the Florida Association of Insurance Agents, said the bills are needed to curb how some law firms abuse the system. The attorney fees for assignment of benefits claims have made insurance costs rise, Grady said.

"Rates are going up," Grady said. "This whole fraud needs to be dealt with."

Grady said it's just a handful of law firms and contractors working together to abuse the system and get money, but if they're not stopped the problem would grow.

"The policyholder is getting the bill for it and unless we fix it, they will continue to," he said.

David Altmaier, state insurance commissioner, released a statement earlier this month in support of legislation to restrict assignment of benefits.

"AOB abuse has an adverse impact on our consumers and directly undermines the ability of Floridians to have reliable insurance products available at affordable prices," Altmaier said. "I will remain a vocal proponent of measures that stem AOB abuse and protect consumers from the abusive tactics exhibited by bad actors who exploit Florida's unique attorney fee structure."

In a Friday email to The News Herald, Jimmy Patronis, state chief financial officer, wrote that he too supported legislation to rein in assignment of benefits. Patronis wrote that some bad actors have abused assignment of benefits to line their pockets.

"I've been clear in my call that all parties need to come to the table this year and do what is right to ensure Florida's consumers are not caught in the middle of this issue," Patronis wrote. "Florida needs common-sense legislation now and we cannot stand by another year and let storm victims be ambushed again by a financial storm in the form of AOB abuse."

Bo Williamson, owner of Noble Public Adjusting Group in Panama City Beach, said assignment of benefits is just a tool that can be used for good and bad.

"The good about AOBs is when you need your house tarped right away and you don't have the money, you can do the work right away and then the roofer can go after the insurance company," Williamson said.

Williamson said the problem with the legislation is that it does more to protect insurers than it does consumers.

Williamson said he didn't think assignment of benefit lawsuits were the cause of rising insurance rates.

"You cannot force an insurance company to pay more than it owes," Williamson said. "They're just using complaints about litigation as an excuse to go up on costs."

Lee Jacobson, an attorney with Hale, Hale and Jacobson law firm in Orlando who has pushed in Tallahassee for lawmakers to support assignment of benefits, said the legislation is anti-consumer.

"I don't think people played out how this will impact day-to-day operations outside of Tallahassee," Jacobson said.

For instance in the Senate bill, it includes a maximum payment of $3,000 when assignments of benefits are used for emergency home repairs, Jacobson said.

"If you're up to your ankle in water and have more than $3,000 in damage at your home, the contractor will ask you for a check for the rest of the repairs or they'll just leave or they'll continue to work and put a lien on your home," Jacobson said. "Then you're stuck trying to get the rest of the money from insurance ... that doesn't sound very good for consumers."

Jacobson said the assignment of benefits lawsuits are occurring because insurance companies are wrongfully denying benefits, adding that insurers only pay attorney fees if they lose.

"If all these lawsuits are so bad, then why do they keep winning," Jacobson said.

Williamson said there needs to be a more balanced approach to fixing issues with assignment of benefits.

"For legislators to fix this they only have to do a few things -- require contractors to detail the scope of work, when they will begin and a tentative end date," Williamson said. "If they cannot do that, then no assignment of benefits."

Ellis said he would fix assignment of benefits by breaking up payments to the contractor.

"Let's say they're working on a $100,000 deal, you pay the contractor until the job is 50 percent done and then the customer is entitled to hold a certain portion of the assignment of benefits until the project is finished," Ellis said. "That would protect the consumer."

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