Florida’s new Assignment of Benefits (AOB) reform bill became law on July 1, 2019, a short time ahead of the peak of this year’s hurricane season. Time will tell if it results in the amelioration of the AOB litigation epidemic, fueled by Florida’s Attorney’s Fee Statute Section 627.428, awarding attorney’s fees to prevailing assignees in insurance disputes. The attorney’s fee statute is credited with having incentivized Florida contractors to litigate even minor differences[1] with insurers over repair work performed or proposed for insureds. Legal bills, rather than the merits of the claims themselves, have often powered these disputes through the Florida courts.
With the new Florida Statute 627.7152 in effect, the attorney’s fees statute has been leveled such that an assignee will recover attorney’s fees only where the difference between the judgment and the presuit settlement offer is at least 50 percent of the disputed amount. Moreover, if the difference is less than 25 percent of the disputed amount, the insurer may be entitled to attorney’s fees.[2] With the bar raised for winning attorney’s fees, and a penalty for a nominal win, we expect assignees will think carefully before instituting a lawsuit, thereby stemming the numbers of AOB lawsuits and reducing the frivolity. Of immediate concern to claims departments, however, the AOB reform statute institutes key logistical changes that claim managers must integrate into their toolkit. Key provisions are:
- Policyholders may rescind the AOB without penalty within 14 days
- The assignee must provide the executed AOB contract to the insurer within three days
- The scope of the AOB must be limited to work performed by the assignee
- The assignee must cooperate in the claim
investigation
- Including Examinations Under Oath and Recorded Statements
- The assignee must participate in appraisal if required by the policy
- Before filing a lawsuit, the assignee must:
- Wait until the carrier makes a final determination of coverage
- Provide the carrier a detailed itemized invoice of services
- Provide proof that work was performed according to industry standards
- Give 10 days’ notice to the carrier before filing suit
with:
- A statement of the damages in dispute,
- The amount claimed, and
- A pre-suit settlement demand
- The carrier must respond to the presuit notice
in writing within 10 business days to avoid suit with:
- A pre-suit settlement offer; or
- Demand for appraisal
Caution
- The carrier must inspect the loss within seven days of first notice of loss (FNOL)
- Or no fee recovery for carrier
The statute, including its claims handling timelines, notice
requirements, and the fee shifting rule are in effect for AOB’s executed on or
after July 1, 2019. The claim handling and fee shifting mechanisms should
incentivize contractors to resolve claims before instituting suit and to reduce
overall litigation. Insurers must implement the claims handling timeline into
their practices in order to fully benefit from the reform. Florida is implementing
data gathering to take place before January 30, 2022 in order to gauge the
impact of this reform.
[1] AOB litigation has sometimes reaped absurd results. For example, after a personal injury protection lawsuit brought by an assignee, attorneys secured $790 for their “prevailing” client and $40,000 in attorney’s fees for themselves. Fernandez, Frank. “Small Claims, Big Impact: Surge in Lawsuits Drives Up Costs for Volusia-Flagler Motorists.” September 23, 2018. The Daytona Beach News-Journal.
[2] Where the difference between the judgment and presuit settlement offer is between 25 percent and 50 percent, neither party may be awarded attorney’s fees.