Tropical Storm Erika Projected to Make Landfall in Florida Soon

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Updated on 8/29 at 8:27 AM.

Tropical Storm Erika may be making landfall in Florida early next week.

Here is a recap of the other most important facts:

  • the current winds are at 40 MPH
  • its moving swiftly WNW at 20MPH
  • Erika’s new projected path takes it along the west coast of Florida.

In the past, we have written a great deal about Florida homeowners insurance claims for hurricane damage.

Here are links to some of our best resources:

What You Need to Know About Handling a Florida Hurricane Claim

What Hurricane Wilma Claims Taught Us for the 2014 Hurricane Season

Remembering the 2004 Hurricane Season and Looking Ahead to 2014

The Florida Homeowners Insurance Statutes

In those articles, we talk about how things have changed since the last hurricane season, and we remind everyone about the sheer volume of claims they can expect.

It’s also worth noting that, due to the recent AOB/water mitigation epidemic, insurers may find themselves involved in 2 to 4 disputes for every home – one with the plumber, one with the mitigation contractor, one with the roofer, and one with the plumber. The amount of lawsuits that could arise out of a hurricane may be more difficult to forecast than the actual hurricane path itself.

As always, we at CaseGlide and First Party Property Insurance Blog will be serving our clients with updated information on their claims and litigation. Should Tropical Storm Erika make landfall here in Florida, we will work together with all of our hundreds of insurance and insurance defense attorney users to lay out the plan for efficiently and effectively resolving disputed claims. Using analytics, automation, and workflows, many insurers and attorneys are in a much better position than they were ten years ago to limit the impact of the lawsuits on indemnity and expenses.

Any questions? Contact us here:

 

* image courtesy of http://www.weather.com/storms/hurricane/news/tropical-storm-hurricane-erika-atlantic-august-2015

A Rude Awakening: the 2015 Florida Homeowners Insurance Litigation Alarm

Florida Homeowners Insurance Claims and Litigation Handbook

Alarm ClockDon’t you wish you were in your bed, with your pillow and your comforter? Imagine the blinds are dropped all the way to the window sill. They’re tilted in a way that not one flicker of light shines in.

I know. Its painful to think about. Everyone loves a good night’s sleep, and everyone probably wishes they were in that cozy cotton cocoon right now.

But too much sleep isn’t good for you either. Sometimes you just have to wake up.

The recent Florida homeowners insurance litigation statistics are the wake-up call. Like the loudest alarm clock, these statistics will startle you.

Based on the 2015 data, Florida’s homeowners insurers can expect lawsuit amounts to at least double over the next twelve months. That means double the compromised indemnity payments, and double the legal fees.

These statistics from the Florida Department of Financial Services website are a rude awakening:

Florida Peninsula has been sued almost 1,000 times this year. Not 1,000 claims. 1,000 lawsuits. That means they have been sued approximately once for every 150 policies they issued this year. With five months left in 2015, that ratio could turn to 1 lawsuit out of every 75 policies.

In June of 2014, Heritage was sued 33 times. One year later, Heritage gets sued 120 times in June. Heritage’s policy count increased by about 30%; however, that doesn’t explain the nearly 400% increase in lawsuits.

Similarly, last June, Universal P & C was sued 78 times. Universal added a small percentage of policies over the past year. That small increase doesn’t explain this: Universal was sued over 200 times this June.

These insurers are not outliers. Most insurers saw a drastic spike in litigation over the past couple of months.

I hope each insurer hears their alarm and doesn’t hit snooze. I doubt shareholders want to wait to find out about a litigation epidemic.

Plaintiffs’ attorneys? They’re the ones sounding the alarm. After handing it to the insurers repeatedly these last few months, there’s no reason to think that the litigation numbers won’t continue their feverish rise.

So what happens if the lawsuits double? If the legal defense costs were $10M in the last year, they could be $20M in the next twelve months. If the compromised settlements were $25M last year, they will total $50M over the next twelve months.

Despite spending hundreds of millions of dollars settling and defending these cases last year, many insurers are still in the dark. Many insurers have no way to analyze what’s going on except through manual spreadsheets. What did insurers pay for in the last twelve months? You show me the product.

With all the money that was spent, insurers should expect to to see either good results … or at least good information on how to obtain good results moving forward. Nope. Insurers don’t have either of those.

Some insurers, however, are capturing and analyzing every piece of data they can. They’re no longer letting their vendors keep all of their valuable information in emails and Word documents. Some insurers have shed light on their most valuable asset – their claims and litigation data – and they’re one click away from knowing what’s going to happen and when. These innovative insurers don’t delegate their most valuable data to vendors’ email inboxes.

With real-time access to every piece of information they need, these maverick insurers see the light at the end of the tunnel: data-driven decisions on underwriting, claims, litigation, and legislation.

The rest of the insurers: good luck figuring out how to profit by analyzing these cases email-by-email over the next couple of years. Continue to delegate settling cases to people without any data, and you will continue to remain in the dark on the solutions.

The alarm has been sounded, now when will the rest of the insurers see the light?


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.


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

The Assignment of Benefits Turning Point in Florida Homeowners Insurance

Florida Homeowners Insurance Claims and Litigation Handbook

In a few years, we are all going to look back on these last few months as the biggest turning point in assignment of benefits-related homeowners insurance claims in Florida.

You might be surprised as to where we believe the new turn will lead us.

We’ve seen this before in the Florida homeowners insurance industry: late notice hurricane claims, mold claims, and sinkhole claims. Advocates for one side take it too far, and it gives the insurance industry just enough ammunition to get the legislative change they need.

We believe that this just happened for water mitigation AOB claims in Florida. We’re about to tell you why.

First, some housekeeping:

If you don’t know what we are talking about, then please review our prior articles here:

AOBs: Nothing But the Facts

Five Ways to Solve the Assignment of Benefits and Water Damage Restoration Insurance Problems 

Recent News on the Florida Assignment of Benefits Issue in Homeowners Insurance

Here are the three key events that have occurred in the last couple of months:

Florida’s legislature failed to act on the insurance industry’s efforts to take legislative action

Click here for Scott Johnson’s article on the death of that bill.

The Fourth DCA issued its opinions rejecting insurers’ arguments against the ability of a water mitigation contractor to obtain AOBs from homeowners.

Click here for a good analysis of those decisions from Bressler Amery & Ross.

In short, the Fourth DCA looked at insurers’ newest arguments against the assignability of an insurance policy. The insurers’ attorneys crafted unique perspectives on an issue that most believed had been settled for quite some time.

Ultimately, the Fourth DCA reviewed the same provision that had been in these policies for decades. Naturally, the Fourth DCA issued the same ruling on that provision that other courts had issued: homeowners can assign their claims.


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.


The First DCA recently determined insurers cannot rewrite the insurance policy to limit the ability of a homeowner to assign a claim.

Here is a copy of this decision:

Security First v. OIR

Let me repeat the overall conclusion of the First DCA’s decision: insurers cannot rewrite their insurance policy to limit the ability of a homeowner to assign a claim. Why not? Because the new provision would confuse the policyholder.

This leads us to some logical questions here:

  • Does the First DCA and OIR think that homeowners understand the current Florida law on AOBs?
  • Does the First DCA think Florida homeowners consider whether a claim is assignable when they call a contractor to help them dry out their home?
  • Couldn’t we just email the new provision to the law firms representing these AOB contractors and ask them to forward the email to their clients – the water mitigation contractors?
    • Once they know it’s the law, they wouldn’t waste their time trying to get an unenforceable AOB from homeowners.
    • They would ask to be paid.
    • The homeowners would never even know anything happened.
    • How could this be confusing to homeowners?

Setting aside this very unique “confusion” standard, the First DCA ignored Security First’s best argument: that old Florida law on an old insurance provision doesn’t apply to a new insurance provision.

The First DCA didn’t waste one word addressing this logical follow up. Instead, the First DCA said that the entire issue is for the legislature to decide.

Let’s back up for a moment. Here is a quick synopsis of how homeowners insurance statutes impact insurers’ abilities to write their policies: insurers have to offer the minimum coverage required by the legislature. They can offer more, but they can’t offer less. Viewed another way, if there is not a statute with a minimum coverage on an issue, insurers should be free to amend their policy any way they want on that issue.

So where is the bare minimum coverage in Florida statutory law that restricts Security First from taking this action? Nowhere!

The legislature has already addressed AOBs. The first sentence of Fla. Stat. 627.422 states that “[a] policy may be assignable, or not assignable, as provided by its terms.” (Emphasis added!).

Why is it that we need to bother the legislature again? It sounds pretty clear that the legislature has already addressed this exact issue: insurers can write whatever they want in their insurance policy with respect to the assignment of benefits issue.

What else does the legislature need to say about this to convince a court that an insurer may rewrite its policy to limit AOBs?

We could dive even deeper into this legislative obstacle that the First DCA placed in front of Security First; however, if you want more information on this, the best source would be to review Security First’s arguments here:

Security First v. OIR Brief

Let’s think about what the First DCA might be saying here: if insurers have a provision in their policy that results in an adverse ruling, they cannot change the provision without the legislature passing a law.

One more time: if it turns out that an insurance policy provision isn’t good for the industry, insurers need to change the provision before getting any adverse rulings on the provision.

Otherwise, homeowners would be confused …

Well, if they are confused, homeowners wouldn’t be alone. Everyone is confused about this ruling.

Accordingly, Florida lawyers and lawmakers have hit the insurance industry hard. Not once, not twice, but three times in the past couple of months. What does this mean as we move forward?

This is Another One of Those Turning Points

We can’t help but draw the parallels between this and many similar issues in recent Florida homeowners insurance history, including late notice hurricane claims, mold claims, and sinkhole claims. If you don’t know what we’re referring to, then that answers your question. Eventually, claimants continue to push and push insurers until the problem becomes so large that insurers have enough leverage to solve it.

It’s pretty obvious that the AOB proponents just pushed insurers to that brink.

First, the AOB industry just obtained a ruling that says insurers cannot amend their insurance policies. This is something that no insurer is going to stand for.

Second, insurers are finally starting to collect extremely valuable data showing evidence of how much these AOB claims cost every Florida homeowner in policy premiums.

Now that Florida lawyers and lawmakers have forced insurers’ hands, we believe there will be much more creative solutions to the AOB problem next legislative session, and mountains of data-based evidence to support the urgent and compelling need to do something.

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

To Hail and Back: The Four Problems with Hail Claims and the Six Tools You Need to Solve Them

Hail Damage Insurance Claims

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Coming to a Roof Near You

As you know, the water extraction assignment of benefits (AOB) issue has had the insurance industry’s center stage for the last couple of months. As a result, we have not heard that much about another trending type of claim. This other trending claim has many striking similarities to the water extraction AOB claims:

  • exponential increases in reported claims;
  • increasing claim payouts per claim; and
  • a industry of contractors, adjusters, and attorneys with growing expertise in litigating these claims.

Before you know it, this type of claim – hail damage claims – will be the center of attention for the insurance industry. The claims keep pouring in (even if the rainwater doesn’t), and no one has dissected the vast array of problems and solutions.


The Four Problems with Hail Claims

  • Suspicious Increases: Insurers are seeing drastic increases in hail claims without a corresponding increase in hail events;
  • An Offer that Can’t Be Refused: Insurers are concerned that roofers are driving these claims with a sales strategy that homeowners cannot refuse – roofers offer to provide homeowners with new roofs, and homeowners will only need to pay their deductible;
  • More Than Meets the Eye: Insurers are troubled when homeowners and their roofers request coverage to replace the entire roof despite an apparent lack of significant damage;
  • An Uneven Playing Field: Insurers are worried that consumer-friendly laws, such as prevailing party attorney’s fees, make the playing field uneven.

Are these concerns true?


 

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.


Problem #1: Suspicious Increases: Insurers argue that they are seeing drastic increases in hail claims without a corresponding increase in hail events.

True or False? Probably true, but there is not enough public Florida claims data to be sure.

The Data on Hail Events

According to the NOAA National Climactic Data Center, reported hail events in Florida have been up and down over the years:

florida hail claims data

Looking at this data, Florida insurers should not be receiving exponentially increasing amounts of hail damage claims, right? Think again.

The Data on Hail Claims

In “AOBs & Roofers?!” Scott Johnson provides the only publicly available Florida data that I am aware of.

Here’s what I learned from one insurer only a few days ago.

For five years, from 2007 to 2012, hail claims were barely on its radar, accounting for a mere 1-2% of total claim volume.  Enter the “roving roofers” armed with “insider secrets”. In 2013 hail claims rocketed 700% to over 7.9% of its total claim volume.

Last year the same insurer had an astounding 11.24% of its total claim volume from hail.  In other words—for five years (2007-2012) it paid $1.8m in hail claims.  Then, in just two years (2013 and 2014) it spent $8.3 million!

Without data, insurers have nothing but their opinions. Although Mr. Johnson’s data is limited, other Florida insurers would probably show similar statistics depending on the counties they do business in. If we in the insurance industry go by our experience, then we know there has been a substantial increase in the amount of hail claims over the years, without any corresponding increase in hail events.

This is why insurers are suspicious. Should they be? Probably, but without more data, it’s not a very convincing argument yet.


Problem #2: An Offer that Cannot Be Refused: Insurers are concerned that roofers are driving these claims with a sales strategy that homeowners cannot refuse – roofers offer to provide homeowners with new roofs, and homeowners will only need to pay their deductible.

True or False? It’s safe to say this problem is true.

I’ll save your attention span on this one and just insert some promotional materials I have been provided. Please keep in mind that I have no personal knowledge who created these advertisements or whether they were ever distributed. If you have any reason to dispute that these are not advertisements used by the companies described, please let me know.

hail ads

As you can see, these are very compelling sales strategies that homeowners will have a hard time refusing. We could go into detail about how these advertisements lead to easy sales … which lead to more easy sales … but we trust that you can see how quickly these businesses can grow.

On a roofer-by-roofer basis, your SIU department can identify any fraud by talking to the neighborhood and researching weather reports.

Maybe these advertisements are legal, maybe they are not.

Are they a genuine problem for insurers? Without question, the answer is yes.


Problem #3: More Than Meets the Eye: Insurers are troubled when homeowners and their roofers request coverage to replace the entire roof despite an apparent lack of significant damage.

True or False? Probably true, but expensive to prove!

If insurance company money was not available, no one would suggest that replacing the entire roof of a perfectly performing roof is a wise decision. But when an insurance company may be responsible, roofers and homeowners forget about economics.

What can insurers do? They can take a stand against the roofer, pay their attorneys hundreds of thousands of dollars, take the cases to trial, and hope that randomly selected jurors will understand their position.

So why don’t insurers simply fight these cases in Court?

In our next problem, we talk about why insurers feel there is an uneven playing field when these hail damage claims turn into court cases.


Problem #4: An Uneven Playing Field: Insurers are worried that consumer-friendly laws, such as prevailing party attorney’s fees, make the playing field uneven.

True or False? True.

Florida lawyers and the legislature have made it very difficult for insurers to find justice in the courts. We don’t want to bore you with a complete dissertation on the Florida court and legislative systems, so we will focus on four reasons why insurers are right – the playing field is not level in hail damage claims.

Juries are Too Late to the Party

First, insurers do not even get to know who decides the case – the jury – until after they have to pay their lawyers four to five times what it would cost to settle the case. (As you can see, this problem applies to all cases, not just hail claims). By the time insurers realize that their jury has no roofing experience, it’s too late for them to fold their cards. Thus, this legal process is set up to have all of the lawyers do hundreds of hours of work, charge hundreds of thousands of dollars, and then the insurers get to meet the most important people in the case – the jurors.

But isn’t that an equal risk that both sides face? Not really, and here’s why:

Unlike Insurers, Roofers have Nothing to Lose

That’s our second reason why the playing field is not level: if a roofer wins the lawsuit, the court will order the insurer to pay the roofer’s attorneys’ fees. If the roofer loses, he usually will not have to pay any attorneys’ fees. In short, insurers have tons of risks – whether they win or lose. Roofers? Virtually nothing to lose.

Low Expectations

The third reason why the playing field is not level is because a “win” for the roofer could mean $1. Yes, $1. With a few exceptions, if a roofer obtains a judgment against an insurer for $1 more than the insurer offered to pay, the roofers’ attorney will get hundreds of thousands of dollars in attorneys’ fees.

Sophisticated Parties, Unsophisticated Rules

The fourth reason why the playing field is not level is because the prevailing party attorneys’ fees law does not make sense in the roofer versus insurer context. The prevailing party attorney’s fees rule was intended to make sure our grandmothers across the state don’t have to pay an attorney to sue their insurance company. This attorney fee rule is a windfall for roofing companies whose sole purpose is to profit. And with sales strategies like these roofers are using, there is no doubt they will make plenty of money soon.


Six Solutions that Should Be in Your Hail Toolkit

Enough with the problems. Let’s talk about the six things you should have in your hail toolkit to prevent indemnity and expense leakage:

1. Engage engineers with hail experience

If you are reading this article, then you’re probably the type of person that has vetted the experts.

Or are you? Have you met all of your engineers investigating hail losses face-to-face?

This is an obvious point, but its importance cannot be overstated. If the jury believes your expert more than the other expert, you will probably win. Go meet with the engineers in the industry and find out who you would believe if you were a juror.

2. Gather your best minds (or hire them) and draft specific policy language for hail claims

After securing the right engineer experts, get your team together to evaluate whether you can draft specific policy language relating to aesthetic roof damage caused by hail. If you can carefully craft this exclusion and satisfy OIR, you can avoid the vast majority of the new claims.

3. Get familiar with all of the weather data tools

Our friend Nick Cammarata’s firm, SDII Global, handles hail claims across the country. When he investigates hail claims, he starts by heavily investigating these three databases:

4. Read Verisk’s E-Book “Property Hail Claims in the United States: 2000-2013

If only they had a 15 page report like this for Florida claims! In this report, Verisk provides hard data showing that the entire nation is seeing an exponential surge in how many hail claims are reported, and how much it costs to resolve them.

5. Talk to Lisa Miller to find out more about how you can help her AOB legislative efforts moving forward

One of the best ways to stop suspicious hail claims is to join Lisa’s effort to legislate AOBs right out of the industry. Of course, hail claims and emergency water extraction claims are two different animals; however, it will only be a matter of time before all of these roofers use AOBs to create litigation factories. As you may have noticed, we need all of the help we can get as the legislature continues to put the AOB issue on the backburner.

All you have to do is join Lisa and her clients. They have spent years pushing the legislature closer and closer towards solving this problem and, until we get some more support, we might continue to face standstills in the legislature. Of course, AOB legislation won’t prevent homeowners (rather than roofers) from reporting suspicious hail claims; however, it will prevent the landslide of new claims that will undoubtedly occur if the legislature does not pass the right AOB law.

Many insurers have already thrown their support behind Lisa’s efforts to stifle AOB claims, and your company should, too.

6. Use data analytics and automation to eliminate unnecessary indemnity and loss payout leakage for hail claims

Using claims and litigation software, your claims team and legal counsel can:

  • know the result of a hail damage claim the second it is reported;
  • automate the routine documents towards solidifying your coverage position; and
  • streamline quality processes to efficiently resolve each claim.

Legal defense fees for hail claims are quickly skyrocketing without any clear end in sight.  If you can leverage all of your prior and future claims data, you may not have to spend a dime to know the best possible outcome and who needs to be involved to get you there.

If you would like to know more about claims and litigation software customized for Florida homeowners insurers, sign up for CaseGlide’s “Six Ways to Split Legal Defense Costs in Half this Year Free Webinar” today.


To Hail and Back

Ultimately, the problems with hail damage claims will not go away by themselves. It’s going to take a real team effort to keep Florida homeowners’ insurance premiums down. After seeing how quickly the sinkhole and water extraction industries grew, we shouldn’t wait until hail claims get to those same dangerous levels.

Every insurer knows the tools they need to solve this problem today. We need experts like Nick to give insurers a backbone at trial to fight the frivolous hail claims. We need insurers to jump to support Lisa’s ongoing legislative efforts, and help her support these same efforts next year. We need data and reports showing the financial impact of these claims, rather than just opinions. Last but not least, insurers should pounce on opportunities to use claims and litigation software to resolve these claims as effectively and efficiently as possible.

Unpack your tools, and let’s go to work.

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

 

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:

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


Solutions

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.

Listen Up First Party Property Insurance Blog Community

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I hope you have been enjoying some of the recent posts about insurance claims litigation innovation. In response to these articles, I know that a lot of you have reached out to me, so this article is for you – the First Party Property Insurance Blog Community.

I have such an impressive list of subscribers to this Blog, including executives and adjusters from virtually all of the top insurance companies in Florida; executives and adjusters from many large national insurers; leaders at many of the law firms handling insurance claims; executives at impressive insurance company consulting partners; and dozens of public adjusters.

I know a lot of you like to stay anonymous. For some of you, I understand why. But for others – people whose income depends on the business they generate at their company – I have no idea why you wouldn’t have already reached out to me and offered your analysis on the Blog. Why wouldn’t you want you message to reach our hundreds of influential subscribers and thousands of viewers per month?

Whatever the reason, I’m calling on you to respond to this post.

Here are some article ideas that I would love to see some of the Community write. If you would be interested in writing any of these articles, I will post them to the Blog and give you full credit:

  • new ways law firms are innovating to provide their clients with better outcomes
  • new ways law firms are innovating to provide their clients with less expensive services
  • new ways to practice preventitive law – suggestions to avoid disputed claims and cases before they happen
  • litigation solutions to the assignment of benefits issue
  • nonlitigation solutions to the assignment of benefits issue
  • outlining the use of “loss consultants” in Florida homeowners insurance claims and their legal boundaries, if any
  • new ways for law firms representing to collaborate to jointly serve their clients (especially insurance defense law firms)
  • emerging trends in homeowners insurance claims and cases
  • new technology tools law firms are using in their practices
  • recommendations for handling the currently debated issue of what are conditions precedent  in a Florida insurance policy, and what aren’t
  • recent success stories and resulting recommendations (my last post about a successful case for CSK was shared with nearly 1,000 people)
  • recommendations for enhancing a proposal for settlement’s validity in insurance claims litigation

Insurance company executives: if I left out anything you would like to see in an article, please message me privately and let me know. I will keep your request confidential and make sure to address your suggested topic.

If you don’t want to contribute, then I will eventually get around to writing on all of these and get all of the credit. If you can contribute, though, I highly recommend doing so. I am even okay with you sharing a link to your website or your company’s website so your bosses are okay with the promotion. I can’t promise you any results or new business if you write one of these articles, but my own experience indicates that it will wind up being an extremely valuable decision.

I’m extremely excited about what this post could stir up. If you have any questions, please let me know!

 

Image courtesy of jesadaphorn at FreeDigitalPhotos.net.


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Five Ways to Solve the Assignment of Benefits and Water Damage Restoration Insurance Problems

Florida Homeowners Insurance Claims and Litigation Handbook

 

Overview

The assignment of benefits issue is still not resolved. While most people in the insurance industry just seem to spew anger about it, some are coming up with solutions. I’ll highlight a few of the potential solutions that have been raised.

Introduction

Imagine that you had an agreement with Ford for a Ford Fusion. You want a good car that works, looks good, and is durable. It’s a $21,000 car new.

Now imagine that Ford sends you a letter saying they assigned your financing agreement to Lincoln. In the letter, Lincoln tells you that they are giving you the Lincoln MKZ, a $36,000 car, and that you have to pay the difference.

Unfortunately, they are basically the same car. You voice your concern and refuse to pay almost twice as much for the same car. In response, Lincoln sues you.

Also, imagine that by law, if Lincoln wins the lawsuit, they can get hundreds of thousands of dollars in attorney’s fees. On the other hand, if you win, the law says you don’t get anything.

That’s the problem Florida’s homeowners insurers face every day. State Representative David Santiago recently authored a scathing article in the Tampa Tribune: Home repair insurance claim fraud hammering Florida. According to experts, assignment of benefits claims are Florida homeowners insurers’ biggest cost driver.

We have heard a lot about the problem. Let’s discuss the solutions available!


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.


Five Ways to Fix the AOB Problem

1. Write it Out of the Policy

One insurer is currently initiating this effort in Florida’s First DCA. Here is a link to that insurer’s Initial Brief on the issue:

http://johnsonstrategiesllc.com/wp-content/uploads/downloads/2014/11/Initial-Brief-Final.pdf

There’s no need to further analyze that option – the brief says it all.


2. Cut Out the Middlemen

If 10 people show up to work every day, 10 people expect to get paid.

That’s what’s happening here.

A plumber makes a repair. In exchange for a referral fee, the plumber recommends a water extraction company and maybe a public adjuster. To be “made whole” to use the phrase loosely, the extraction company needs to at least cover the deductible the homeowner is generally required to pay. Additionally, the public adjuster takes a large percentage of the claim proceeds for payment.

Then, if the insurance company refuses to pay the surcharge to this cast of characters for their involvement, the extraction company hires an attorney. The attorney then needs to obtain his or her maximum fee, which can range from 33% to 40% of the payout. Ultimately, for everyone to walk away satisfied, this team has to obtain a lot more than the cost to repair the damage.

That may not be what insurers should owe them, but the circumstances dictate that the best business decision may be to just pay it.

Insurers could circumvent this process by entering into managed repair agreements with or buying the largest plumbing operations and water extraction companies in the industry. For carriers paying $3,000,000 per year in referral fees and “waived deductibles”  this could be a worthwhile investment.


3. Use Data Analytics to Resolve these Cases More Efficiently

Forget about paying the plumber, public adjuster, and water extraction company for a second. Insurers also have to pay their staff and panel counsel millions of dollars per year to adjust and defend these claims.

If all insurers can do is save their cost of doing business, that still could result in good news. Reducing or eliminating insurers’ cost of doing business can have a huge impact on their bottom line. Insurers don’t need courts or the legislature to reduce their costs; all they need is to better understand what has already happened.

We already discussed the baseline amount of money that the cast of characters needs to break even. What if insurers just paid them that based on prior claim and case data? The insurers could save millions in loss adjustment expenses for their own staff and panel counsel. Hypothetically, the cast of characters’ break-even point would be decreased if less of them needed to be involved, such as the attorney.

Insurers could use data analytics to report on a variety of factors that impact settlement, including the public adjuster’s, water extraction company’s, and attorney’s settlement amounts in historical data. Insurers could also use data on prior damage estimates to reach benchmarks that insurers know these parties will accept as a settlement.

People may lie, but data doesn’t. If insurers want to know how to efficiently resolve the next claim or case, the first thing to do should be (but isn’t always) looking at how they have resolved thousands of prior claims and cases.


4. Pass a Law Banning Assignment of Benefits

Insurers, public adjusters, and other groups have joined forces to try to pass legislation to eliminate the assignment of benefits issue. This same group was unable to succeed the last time they tried.

As discussed in Home repair insurance claim fraud hammering Florida, these efforts are still in progress.

We at First Party Property Insurance Blog discussed the legislative efforts against assignment of benefits in this article:

http://firstpartyproperty.com/blog/the-policyholders-bill-of-rights-working-group-issues-its-final-report/

Based on what happened in the last legislative session, the people pushing these reforms are facing an uphill battle. Nevertheless, if it is possible for Florida to pass a homeowners insurance bill without loopholes, legislation has the power to close the door on assignment of benefits claims forever.


5. Defend All of the Cases and Take Them to Trial

This is not my favorite option, and I will tell you why at the end.

The option: turn off the faucet of money and see what happens. These companies and their representatives (adjusters and attorneys) may not have the financial stability to aggressively pursue these claims for years without being paid. That is something worth considering. Litigating is expensive. Cash flow is king.

Assignment of benefits contractors also have one disadvantage specific only to them. Regular homeowners insurance lawsuits involve a homeowner and damage to their home. Most juries are going to feel sympathetic for the homeowner. Most juries would want people to do the same thing for them if they were the homeowner that felt wronged by a big, powerful insurance company.

However, in a case where the assignment of benefits contractor is the plaintiff, juries are less likely to have that same empathy. If the juries think that both companies are being stubborn, they may be just as willing to side with the insurance company as they are with the water extraction contractor.

Further, homeowners insurers should be able to defend their position. The question will usually be “how much does it cost to repair a water damaged house?” With two companies battling it out (instead of one person versus a big company), insurers should be confident enough in their legal team that they can defend their coverage payment decision.

This option was the fifth option for a reason. I think it’s the worst option. Here is why:

  • Win or lose, the insurers will have to spend millions in legal defense costs, and they probably won’t be able to recover most of it;
  • If they lose, they not only have to pay their attorneys millions; they also have to pay millions to the plaintiffs’ attorneys; and
  • The difference between winning and losing in cases like these can be as little as $1.

Now you know why this is my least favorite option.


Conclusion

Cutting out the middlemen sounds like the most fun option; however, it sounds difficult to execute as well.

There is a clear winner here: Option 1. Amending the insurance policy is the least expensive of the 5 options. It also has the potential to completely resolve the issue.

So what if that fails? My second favorite option is Option 3 – Data Analytics. If you are a First Party Property Insurance Blog reader, then you know how strongly I believe in the power of business intelligence to change homeowners insurance litigation. If you are not an avid reader, check out my article for Claims Journal: Claiming What’s Yours: Why Homeowners Insurers Need Claims Litigation Analytics. Technology has changed everything else in this world. Why not us?

Today, both passing a law and trying all of the cases seems like too much risk for reward. The law could pass; however, contractors and their attorneys will likely find a loophole the first time around. Try reading the homeowners insurance statutes. Unless you have First Party Property Insurance Blog’s Annotated Homeowners Insurance Statutes Page saved in your browser, it’s very difficult for anyone to understand the laws without years of experience. As for trying all of the cases, I already explained all the risk involved. These options are not that exciting.

Again, I think amending the policy and data analytics are the ways to go.

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

CSK Wins Pasco Sinkhole Trial

Cole, Scott & Kissane Law Firm

* Post updated on 2/5/15 to reflect the potential that one other case “may” have been the first complete defense verdict in a denied sinkhole claim in Pasco County.* home 3The Law Firm of Cole, Scott, & Kissane P.A. recently obtained a complete defense verdict in a “denied” sinkhole claim in Pasco County, part of Florida’s “sinkhole alley.”  During the investigation of the underlying claim the insurance carrier retained engineers to conduct sinkhole testing at the property and determine the cause of the damage.  The engineers ultimately eliminated sinkhole activity, citing instead to the presence of improper fill materials as well as the decay of organic materials found in the soils within the foundation’s “zone of influence.”  Relying on the engineers’ certified and statutorily-complaint opinion, the insurance carrier denied the claim.

Approximately two and a half years later, the insured filed suit and provided a competing engineering report which included additional subsurface testing.   As a result, the claim was submitted to neutral evaluation.  The neutral evaluator, after conducting even more subsurface testing, ultimately agreed that sinkhole activity could be eliminated as a cause of the damage and that the damage was a result of the decay of organic materials under the foundation.

Undeterred, the insured retained two other highly-credentialed experts who conducted even more subsurface testing and provided sworn opinions that sinkhole activity was present.

After nearly four years of litigation, the case was tried before a Pasco county jury in late January of 2015.  Prior to trial commencing, the Court made significant rulings in the Plaintiff insured’s favor, including placing the burden of proof on the insurance carrier consistent with the latest 2nd DCA opinion as well as allowing subsurface data from surrounding properties into evidence.  At trial, the jury heard extensive and highly technical testimony from both sides’ professional geologist and geotechnical engineer experts.  At the end of the third day of trial, the jury deliberated for approximately 3 hours before returning a verdict in favor of the insurance carrier.

This case represents a rare defense verdict on a “denied” sinkhole case in Pasco County and was the first sinkhole case tried before the new Judge (Sharpe).

Trial team – Aram Megerian (Lead)/William Woods (2nd Chair)

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

Citizens Approves Another Round of Florida Homeowners Insurance Takeouts

Citizens Home Insurance Florida

Overview:

The Citizens takeouts continue. Insurers were recently authorized to assume nearly 100,000 policies from Citizens. Read more to find out the companies involved in this round of takeouts, and how successful the recent takeouts have been.

Update on Citizens Takeouts

Florida regulators approved Florida insurers to assume approximately 93,500 policies from Citizens. The companies and their allotment include:

  • Mount Beacon: 35,000
  • Anchor Property & Casualty: 28,000
  • Heritage: 20,500
  • Southern Oak: 10,000

The Tampa Tribune gave us some interesting statistics on how many of these recent takeout approvals actually converted to takeouts. In 2014, although approximately 1.1M policies were approved for assumption, insurers only assumed approximately 415,000.

In the last two years, Citizens has seen its policy count decrease from approximately 1.5M to 661,000. As a result, Citizens’s exposure has decreased from $510B to $200B.

If you want to know more about the takeouts over the past several months, here are our articles:

If you want to learn more about some of the other insurers involved in the recent takeouts (Mount Beacon, Anchor, Homeowners Choice, and more), make sure to click on the links in the bullets above, or you can view all of our Takeout articles on one page here.

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

Second DCA Finds Florida Peninsula Does Not Have to Provide Sinkhole Coverage under Policy Without Sinkhole Coverage

Florida Peninsula Home Insurance

fist-pump-baby

In a sinkhole case where I handled the underlying litigation for Florida Peninsula, the Second DCA determined Florida Peninsula was not required to provide sinkhole coverage to an insured who did not have sinkhole coverage.

I know how funny that headline may sound to you; however, the Plaintiff’s attorney argued that the policy was ambiguous for the following reasons:

  • the policy’s “Checklist of Coverage” had a “Y” next to the word “Sinkhole;”
  • the insurance agent testified she selected sinkhole coverage;
  • Florida Peninsula allegedly did not comply with certain notice requirements for excluding sinkhole loss; and
  • part of the policy discussed the Neutral Evaluation process.

If you want to know more about each of these arguments, please review the order embedded at the end of this post.

The Plaintiff’s law firm, Thompson Trial Group, did such a good job at the trial stage that they convinced the trial court that, as a matter of law, the Plaintiff had sinkhole coverage. At the trial court level, I explained to the trial court that all of Plaintiff’s argument fail as a matter of law. The Second DCA’s rationale set forth in the opinion reflects exactly what our arguments were at the trial stage. In short, statutes and case law clearly negated the Plaintiff’s arguments for coverage, and the exclusions were clear … to say the least. Nevertheless, the trial court reasoned that the Neutral Evaluation provision created an ambiguity.

Some other “fact” arguments in Florida Peninsula’s favor included:

  • Plaintiff did not pay the premium for “sinkhole loss;” and
  • Plaintiff did not even remember if she tried to obtain sinkhole coverage.

Not only did I set forth all of the legal principles outlining why Plaintiff’s counterarguments failed as a matter of law; I actually obtained raw computer data showing that the Plaintiff’s agent did not select sinkhole coverage. To try to save the costs of having to prove this matter at the appellate level, we wanted to cover all of our bases in the unlikely event that a fact issue remained.

Unlike the trial court, the Second DCA acknowledged my arguments (through other appellate counsel) that all of the Plaintiff’s legal arguments were not sufficient under Florida law. Although the trial court granted summary judgment for the Plaintiff, the Second DCA (1) reversed the trial court’s summary judgment for Plaintiff AND (2) remanded it to the trial court to enter judgment for Florida Peninsula.

After waiting years for this decision, I am very pleased and happy that Florida Peninsula trusted us to take the risks of pursuing this matter all the way through its conclusion.

* Of course, the ruling is not final until time for a rehearing has passed, and Plaintiff is free to appeal this matter to the Florida Supreme Court.

Here is the complete order:

Download (PDF, 97KB)


Have Any Questions about Florida Homeowners Insurance Claims?

If you have any questions about this article or Florida homeowners insurance claims and litigation, please contact us.


 photo courtesy of http://www.uasblog.net/wp-content/uploads/2014/05/fist-pump-baby.jpeg

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