Ah, Florida. Home to sun-washed beaches, Kennedy Space Center, the woeful Marlins – and one of the most costly tort systems in the country.
A significant driver of these costs is Florida’s “assignment of benefits crisis.”
Today the I.I.I. published a report documenting what the crisis is, how it’s spreading and how it’s costing Florida consumers billions of dollars. You can download and read the full report, “Florida’s assignment of benefits crisis: runaway litigation is spreading, and consumers are paying the price,” here.
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 nearly 135,000 through November 9, 2018, a 70 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.
Many of these inflated bills and lawsuits are driven by a select number of contractors and their attorneys. Florida insurance customers can protect themselves – and their fellow citizens – by being very cautious when signing away their benefits under an AOB.
Florida’s Department of Financial Services has published a “red flag” checklist for spotting fraudulent or abusive AOB solicitations. But the most important thing you can do is to talk to your agent before you sign anything!
To learn more about the crisis, download our report: “Florida’s assignment of benefits crisis: runaway litigation is spreading, and consumers are paying the price.”