Insurers vow to keep up fight against benefits abuses

Oct. 28--Insurance industry executives may have been gathered in Orlando for the Florida Chamber of Commerce's annual insurance summit this week, but much of their focus was on South Florida.

Insurance executives on Tuesday vowed to curtail what they call abuse by South Florida trial attorneys and water restoration companies of a contract clause called Assignment of Benefits.

The clause, they said, allows insurance policyholders to be taken advantage of at their most vulnerable time: when faced with a flood caused by a plumbing emergency. Before commencing work on drying a home, contractors will persuade a homeowner to sign over the benefits of their insurance policies, then sue the insurance companies for far more than the repairs would normally cost, the executives said.

Contracts signed by policyholders often leave them in danger of hefty administrative fees from restoration companies, said Angel Conlin, an attorney for American Strategic Insurance Co. Some contracts impose a fee of 30 percent of the insurance settlement if the policyholder cancels the work contract, she said, and failure to pay can result in liens on the policyholder's homes.

Policyholders also are kept in the dark about legal actions being taken in their name because attorneys for restoration companies contend an assignment of benefits allows them to "stand in the policyholder's shoes," Conlin said. "I find that offensive. They shouldn't have the right to stand in the shoes of the insured and place a lien on the insured's home."

Steve Weinstein, general counsel for RennaissanceRe Holdings Ltd., a reinsurance provider, said the abuses are impacting insurance costs for every individual and business in Florida. Weinstein presented a training video by a Tampa law firm that tells repair contractors they have nothing to lose by persuading policyholders to sign over their benefits.

When signing over benefits results in a lawsuit, only insurance companies have to pay court costs, the video said.

Sal J. Nunzio, vice president of policy from The James Madison Institute in Washington, D.C., outlined recommendations from a policy brief released last week by the institute.

The brief argues that the financial solvency achieved by the industry after a decade without a hurricane is imperiled by high costs of inflated claims and litigation stemming from assignment of benefits abuses.

It proposes requiring third parties to assume not only the benefits but also responsibilities required of policyholders, including providing proof of loss and supporting documentation and to "submit to examination under oath if necessary."

Policyholders also should be given an opt-out period if they feel compelled to signing over insurance benefits under pressure, the brief urges.

Also, trial lawyers representing vendors under an assignment of benefits should not be allowed to collect attorneys fees under a law that prevents insurance companies from collecting legal fees when they win, the institute recommends.

Conlin urged support for a new Senate bill that would limit assignment of benefits to claims up to $2,500, bar cancellation fees or check processing fees, bar contracts from preventing policyholders to communicate with insurance companies, and allow policyholders to cancel the assignment within three business days.

Supporters face a challenge getting the bill passed. Three previous bills aimed at restricting assignment of benefits have failed over the past three years amid opposition by trial lawyers and their allies.

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