Florida legislature passes AOB reform

Insurance Journal reports that the Florida Senate has passed a bill designed to reform parts of the state’s insurance assignment of benefits (AOB) system. Governor Ron DeSantis has stated that he plans to sign the bill into law.

Florida’s AOB system has long been in dire need of reform.

As we document in our report “Florida’s assignment of benefits crisis”, an assignment of benefits (AOB) is a contract that allows a third party – a contractor, a medical provider, an auto repair shop – to bill an insurance company directly for repairs or other services done for the policyholder.

The process is innocuous and common throughout the country. But as our report notes, Florida’s unique legal systems richly rewards plaintiff’s attorneys and vendors when they submit inflated bills to insurance companies and then file lawsuits when those bills are disputed.

Not just a few lawsuits. Lots of lawsuits. The numbers are staggering. There were roughly 1,300 AOB lawsuits statewide in 2000. There were more than 79,000 in 2013 and more than 153,000 in 2018, a 94 percent increase in just five years.

Inflated claims and massive volumes of lawsuits have the predictable result of driving up insurance companies’ legal costs. Insurers are forced to then pass those costs on to consumers. In the study, we estimate that Florida’s auto and homeowners policyholders have paid about $2.5 billion more for insurance over the past dozen years to cover the increase in legal costs.

That doesn’t even count the billions more in excess claim settlements that are at the heart of the problem.

The new bill seeks to address the problem by reforming how AOBs can be executed and how plaintiff’s attorneys can get paid for lawsuit settlements. If signed, the bill will come into effect on July 1, 2019.

You can download our report documenting the crisis here.