AOBs … Nothing But the Facts

Florida Homeowners Insurance Claims and Litigation Handbook

First Party Property Insurance Blog (9)There has been a flood of analysis of the assignment of benefits (AOB) issue lately. Throughout the debates over new AOB legislation, a lot of facts have been revealed. For those of us who are too busy to collect all these updates, we wanted to provide you with a cheat sheet of resources on the AOB issue.

Status of HB 669 – the AOB Legislation

HB 669 is now waiting to be passed through the House Regulatory Affairs Committee.

What would happen if HB669 is passed?

Limiting the focus to contractor-related AOB issues, HB669 would have the following impact:

  • clarifies that contractors cannot act as public adjusters
  • voids “any assignment or agreement that purports to transfer the authority to adjust, negotiate, or settle any portion of a claim to such contractor or subcontractor … “
  • states that insurable interest does not survive an AOB except to a subsequent purchaser of the property
  • permits insurers to prohibit post-loss AOBs in their policies with two additional rules:
    • insurers cannot limit in their policy AOBs up to $3,000
    • the assignment can only give the assignee the ability to be named as a copayee on coverage payments, and the insured cannot assign the right to enforce payment
  • declares that all assignments that violate this section would be void

Although a previous version of the bill prevented AOB assignees from the right to obtain attorney’s fees in court, this is absent from the latest version of the bill.

Here’s is a copy of HB669:


Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook and Litigation Data Reports:

Before we go on, if you are in the Florida homeowners insurance claims industry and are looking for a guide with the key cases, strategies, laws, attorneys, and adjusters, or if you’re looking for Florida litigation data reports, please visit this page to learn more about our Florida Homeowners Insurance Claims and Litigation Handbook.

AOBs are Costing Insurers a Lot of Money, and Making Attorneys a Lot of Money

Here are some key facts from the House of Representatives Staff Analysis:

  • Citizens Water Claims in General:
    • 70% of Citizens 2014 claims were water damage
    • 56% of those claims were not caused by weather
    • 72% of Citizens water claims came from the Tri-County area
    • 75% of all 2013 litigation involved water claims

Here is a copy of the HB669 analysis:

HB669 Notes

Scott Johnson of Johnson Strategies has also provided a great deal of data on the impact of AOB claims:

  • In “AOB … the woods are on fire!,” Johnson researched how many lawsuits are arising from AOB claims, and the research revealed:
    • there could be approximately 50,000 AOB lawsuits in Florida each year
    • AOB plaintiffs have already sued Citizens 157 times in 2015;
    • AOB plaintiffs sued Florida Peninsula 253 times last year, and 80 times in the first 45 work days of 2015

AOB Lawsuit Chart

* chart from Scott Johnson’s article noted above

  • In “AOB … an ugly iceberg!,” Scott provided some additional data:
    • since 2005-2006, AOB lawsuits have increased nearly 1,000% to 92,521 over the past two years
    • many attorneys have filed thousands of these lawsuits over the past two years

Lastly, Citizens produced a thorough report on the impact of AOB claims:

  • Key facts include:
    • the Tri-County area accounted for 93% of the claims with representation
    • the Tri-County area accounted for 98% of the water claims with representation
    • of 562 new suits reviewed, 479 involved claims where an attorney provided the first notice of loss to Citizens

Here is the Citizens report:

Citizens Water Damage and AOB Report 2 2015

What’s Happening in the Courts

As discussed in our post “Five Ways to Solve the AOB Problem,” Security First is requesting the First DCA to allow it to prohibit AOBs in its policy.

In the House of Representatives Staff Analysis, they mentioned that three cases were pending in the Fourth DCA. They were all set for oral argument on March 24, 2015. Decisions on these cases could take months to years.

Last week, Florida 5th DCA in Accident Cleaners v. Universal Ins. Co. ruled in favor of an AOB contractor on the insurable interest issue. Here is the full opinion here:

Accident Case


We’ve already spent tons of time discussing solutions on the AOB problem here on the Blog.

At the end of the day, the worst thing we can all do is just keep “working hard” like we did with sinkhole claims. With sinkhole claims, insurers spent hundreds of millions of dollars for their teams and vendors to just keep “working hard.” It wasn’t until legislation came through that the sinkhole issue was resolved. Then, after sinkhole claims were nearing extinction, several key Florida cases came out after the hundreds of millions had already been spent “working hard.”

We can learn from our mistakes.

We need to push this legislation as much as possible by supporting those who are in Tallahassee trying to solve this problem for the entire industry. We learned from the sinkhole crisis that the quicker we get this done, the better.

We need to stop “working hard” and start “working smart.” If you think there is a defense to AOB claims, assert it now and take it through the appellate courts. But don’t do this the old fashioned way. Things have changed since the sinkhole crisis. Insurers now use claims litigation software to (1) ensure quality control and uniformity and (2) save millions in DCC costs. All of the legal and disputed claims processes can be streamlined, and all of these documents can be automated. There’s no need to relive the sinkhole crisis again when software exists to avoid it.

Not only that, but claims and litigation software can provide you searchable and sortable benchmarks on how to resolve these claims and cases. If you are an insurer that does not want to pay $10,000 each time a lawsuit is filed just to settle it, then use software to collect the data on all of the prior claims and cases. Turn this data into actionable analytics telling you what claims and cases will settle for, when they will settle, and who you should hire to get efficient resolutions.

Every insurer and insurer business partner needs to make AOBs the focus of their biggest claims initiatives today. At this rate, AOBs will become much more costly than the sinkhole crisis (if they haven’t already). Don’t sit around and let a handful of people to fight this fight. People have already built businesses and initiatives that can solve these problems for you. Go support them.

If you have any questions about this article or anything else Florida homeowners insurance related, please contact me.