TALLAHASSEE, Fla. – With insurers and regulators blaming a surge in water-damage claims for higher property-insurance rates, Florida lawmakers Tuesday began grappling with a controversial debate that includes homeowners, contractors, insurance companies and trial lawyers.
The issue centers on a practice known as "assignment of benefits," which involves homeowners signing over insurance benefits to contractors who are hired to do repairs. Supporters say the practice can help ensure that insurance companies pay claims properly --- but critics say abuses of the practice are driving up insurance premiums.
The Senate Banking and Insurance Committee heard testimony from both sides Tuesday, and the House Insurance and Banking Subcommittee is scheduled to host a panel discussion Wednesday. Lawmakers also tried to untangle the issue last year but could not reach agreement on a bill.
"The time to act is now," state Insurance Consumer Advocate Sha'Ron James told the Senate committee Tuesday.
Much of the focus of the issue is on Miami-Dade, Broward and Palm Beach counties, where water-damage claims for problems such as leaking pipes have soared in recent years. The increased claims have affected the state-backed Citizens Property Insurance Corp., which blames water-damage claims and assignment of benefits for playing a key role in rate increases taking effect Feb. 1.
Critics contend that assignment of benefits can lead to inflated or fraudulent claims and increased lawsuits against insurance companies. David Bronstein, an insurance-defense attorney who spoke on behalf of the Florida Justice Reform Institute, told senators that the current assignment-of-benefits system "is simply not in the best interest of Florida consumers."
"This whole AOB (assignment of benefits) system is about a special interest of lawyers and vendors creating clients, as opposed to clients in need of lawyers," Bronstein, who is from Broward County, said. "No one's house gets fixed any better or any faster. It only gets fixed more expensively with this fabricated system that's been in place for a few years now."
But some contractors Tuesday accused insurance companies of delaying claim payments or not paying the proper amounts. They said assignment of benefits helps force insurers to act properly.
"They don't pay me. I wait 60, 90, 120, 150 days to get paid. … There's so much abuse (by insurers). The AOB protects us little guys, the David against the giant," said Dave DeBlander, owner of Pro Clean Restoration & Cleaning in Pensacola.
Members of the Senate committee said relatively little about the assignment-of-benefits issue, though Chairwoman Anitere Flores, R-Miami, released a statement later that said the meeting "ensured us the opportunity to openly discuss the rising costs of insurance, and the need to stay accountable to consumers."
"The insurance rate hikes that have been going into effect recently will negatively impact the growth of our state in regards to home ownership and new business opportunities," Flores said. "As an advocate for legislation that keeps insurance rates predictable and affordable, I reminded my Senate colleagues that we were not only elected as the voice of our constituents in Tallahassee; we were elected to bring about responsible reforms on a growing statewide challenge."
Citizens Property Insurance has aggressively targeted the assignment-of-benefits issue. Officials said last month that Citizens could grow by about 50,000 policies in 2017, as private insurers shy away from issuing policies in South Florida because of water-damage claims.
But some contractors said lawmakers should use regulations to weed out people who improperly use assignment of benefits, rather than making major changes to the system.