Each year, FAIA's advocacy staff develops succinct summaries of insurance-related issues to help lawmakers, the media, and the public better understand these often-complicated insurance topics. Here are the topics for the 2017 Legislative Session:
Assignment of BenefitsExporting Commercial Residential Policies to Surplus Lines MarketRide Sharing Insurance Gaps
PROBLEM: Assignment of Benefits
(AOB) abuse, which occurs when unscrupulous vendors file inflated claims with
insurance companies and then threaten to sue if the claim is not paid, is
driving up the cost of property insurance premiums in Florida.
BACKGROUND: In residential property
insurance, AOB occurs when a policyholder has a loss and signs a contract with
a third party to remediate the damage. The contract also provides for
forfeiture (assignment) of the proceeds (benefits) of the homeowners insurance
policy to a third-party remediator, often a water extraction firm or roofer.
water claims represent over 50 percent of total non-catastrophic claims, let’s
use one for example. A cracked water pipe floods a home. A plumber fixes
the leak and refers the homeowner to a water extraction company, which tells
the homeowner a contract must be signed before work can begin. The homeowner
often doesn’t know about the AOB provision or doesn't understand its
implications. The insurer is billed $12,000, but knows that extractions for a
comparable house typically run about $3,500. It investigates or attempts to
negotiate, but the mitigation company files suit and threatens to put a lien on
the insured’s home.
far too many situations, the claim is paid (since attorney fees are in addition
to the claim in such situations and costs mount quickly), but the homeowner is
left with an incomplete job, shoddy workmanship, and no recourse.
SOLUTION: Legislation is needed that defines "assignment agreement," prohibits the transfer of one-way attorney fees from the policyholder to third parties, provides consumers the ability to rescind the assignment agreement, and includes several other provisions meant to keep policyholders in control of their claim.
CALL TO ACTION: Support legislation to curb the abuse.
PROBLEM: The law requiring a
diligent effort form for exportation of commercial residential risks
(condominiums) to the surplus lines market does not align with marketplace
realities, is haphazardly enforced, and doesn’t serve the best interests of the
sophisticated commercial residential customer. The law also sets traps for
agents, who risk investigation and enforcement action if they act in accordance
with their customer’s wishes.
BACKGROUND: Current law prohibits
agents from securing insurance coverage for commercial residential property
through a surplus lines insurer if the risk is already covered or could be
covered by an admitted insurer. Before agents can export a policy, they are
required to complete a diligent effort form that shows rejection of coverage
from at least three admitted insurers, even though the commercial residential
customer in many cases is looking specifically for coverage in the surplus
lines market, where better coverage is sometimes available at a better price. A
customer will typically seek out another agent who either does not have access
to an admitted insurer willing to write the risk, or who might not properly
execute a diligent effort form, thus allowing the policy to be exported to the
surplus lines market.
SOLUTION: Senate Bill 208 by Rep. Passidomo and House Bill 191 by Rep. Beshears amends the law to remove the diligent effort
requirement, as is the case for most types of commercial insurance, and instead
require an agent wishing to export a commercial policy to the surplus
lines market to obtain the insured’s signature on a disclosure form. This encourages an agent to
discuss all available insurance
options with his client, including those offered by admitted and non-admitted carriers.
TO ACTION: Support SB 208 and HB 191.
PROBLEM: Regulation has not kept pace with the rapid growth of ride-sharing
services such as Uber and Lyft. As such, there’s no statute that specifically
addresses insurance coverage requirements for ride-sharing companies and/or
drivers. Until rules of the road are in place, the personal and financial
safety of consumers, passengers, and drivers is at risk.
BACKGROUND: Personal auto insurance policies (PAPs) are not intended to cover the
higher risks associated with using a car for commercial purposes, which is why
the typical standard PAP contains a “livery” exclusion that applies when the
vehicle is being rented out or used to carry passengers for hire. This
exclusion means any damages or losses sustained when the car is being used for
ride-sharing activities will not be covered. The policy also will not provide
coverage for the driver or passenger if either is hit by an uninsured or
underinsured driver, and won’t provide coverage to repair the driver’s vehicle
if it is damaged while being used for hire.
companies may have commercial liability coverage, but it’s not clear when it
applies. Does it apply when drivers have the app on but have not yet been
matched with a passenger? Does it apply after a passenger has been dropped off?
Without policymakers taking action, uncertainty about whether there is proper
coverage for injuries or damage caused by an accident will continue.
SOLUTION: Senate Bill 340 by Sen. Brandes and House Bill 221 by Rep. Sprowls ensures
adequate insurance is in place to protect drivers and passengers. The
CALL TO ACTION: Support SB 340 and HB 221.
AOB Video Tool:This video explains what Assignment of Benefits fraud is and how to prevent it.
Posted by Florida Association of Insurance Agents on Tuesday, March 31, 2015
This video explains what Assignment of Benefits fraud is and how to prevent it.