Call insurer Citizens ‘AOB Refugee Fund of Florida,’ amendment says

Update 2: Also submitted and withdrawn Tuesday: “The corporation is officially recognized as the Barry J. Gilway Retirement Fund,” says an amendment by state Sen. Gary Farmer, D-Fort Lauderdale, attorney and insurer nemesis on this issue. Gilway is the Citizens CEO, whose pay of $550,000 is lower than private counterparts but still four times the governor’s as the state-run company has shed customers.

Update: The amendment was withdrawn at 9:52 a.m. Tuesday, it says here.

Original post: They call Alabama the Crimson Tide, but how about state-run Citizens Property Insurance Corp.?  A proposed amendment filed Monday on a state bill says, “The corporation is officially recognized as the Assignment of Benefits Refugee Fund of Florida.”

State Sen. Jeff Brandes

Maybe it is not as catchy as “Deacon Blues,” but welcome to the last week of the legislative session. It is a time of sardonic humor and frustration sprinkled with tiny droplets of hope for buzzer-beating victory. Insurers and their allies are watching the clock tick on changes they say are needed to curb inflated claims.

To recap: insurers say problems start when contractors on claims such as a leaky roof or plumbing failure say they’ll handle the claim with the insurance company if the homeowner signs a form. That is known as assignment of benefits, or AOB. Then some contractors inflate the claim and hire lawyers, insurers say — taking advantage of state laws meant to protect little-guy consumers in court cases and collecting big fees, driving up rates for all.

Attorneys and contractors have argued property insurers could solve the problem by paying claims promptly or winning bogus cases in court, not by restricting consumer rights to representation.

The amendment to HB 925 is sponsored by Sen. Jeff Brandes, R-St Petersburg.

“Senator Brandes filed the amendment because he believes CPIC (Citizens) will repopulate as a result of the increasing costs of AOB on Florida’s domestic insurance market,” a Brandes aide said. “CPIC has their annual rate increases capped and as AOB costs continue to push up cost of insurance in the private market, policyholders will flood back to CPIC. He believes that if the legislature is not going to address the issue of AOB, they might as well acknowledge the reality of what Citizen’s will become. ”

A spokesman for Citizens, the last-resort insurer that is the state’s second largest, declined comment.

As The Palm Beach Post has reported, claims of a crisis can be challenging to sort out. Citizens blamed AOB for a $27 million loss in 2016, but it also spent $181 million, or six times that much, on optional offshore reinsurance that did not pay any claims as its customer count was falling.

The state’s largest insurer, Universal Property & Casualty Insurance Co.,  told stock analysts the severity of its AOB claims has been falling for a couple of years and an uptick in frequency was “nothing major.” It kept things under control by responding to claims quickly, its CEO said. A company representative later said that was in no way meant to downplay a very serious problem facing the industry.

In any event, the House passed another bill, HB 1421, that insurers backed. It imposes new restrictions on attorney fees in such cases, but it will take some last-minute fancy footwork to get through the Senate.

Could HB 925, which deals with a variety of issues at the state’s Department of Financial Services, become a vehicle for late-breaking action?

Not likely, one party to the proceedings said, but stranger things have happened in the last week of session.

 

 

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