Homeowners win! A six-plus-year effort to pass property insurance Assignment of Benefits (AOB) reform legislation came to a close on Wednesday after the Florida Senate passed HB 7065 on a 25-14 vote. The measure still needs Gov. Ron DeSantis’ signature to become law, but he issued a statement saying he plans to sign it. Once signed, the law becomes effective on July 1, 2019.
“Florida Realtors joined the effort to bring meaningful reform to the AOB process because we recognized the growing problem for what it was – a threat to homeownership,” says 2019 Florida Realtors President Eric Sain,
AOB was designed to help property owners streamline repairs to their home by empowering them to “assign” their insurance benefits to a private contractor who would then complete the task and work directly with the homeowner’s insurance company to secure payment.
But a growing number of contractors, such as water remediation companies and roofers, have been inflating the cost of repairs and filing lawsuits if insurers refuse to pay. Rather than go through a potentially expensive court fight that could require insurers to pay all of the homeowner’s court fees, insurers often settled these claims and passed the cost off to policyholders.
What does the AOB reform bill do?
The House passed the bill April 11, and the Senate ultimately went along with the House’s plan. An example of changes in the bill:
- Non-AOB policies: Insurers will be allowed to offer policies that don’t include, or restrict, AOB claims. A contract that does not allow a homeowner to assign benefits should cost less than one that does.
- Limit attorney fees: Another key part of the bill would effectively limit attorney fees in AOB lawsuits filed by contractors against insurers. The fee changes, which involve a formula, would apply only to vendors assigned benefits – not lawsuits filed by policyholders, who can still have their attorney fees paid if a court agrees that the insurer owes them money.
- AOB requirements: It must be in writing; it must include an itemized estimate; it must include a written disclosure; it must include a 14-day rescission period. Once completed, assignees have three business days to notify the insurer.
- Homeowner protection: If a homeowner’s policy doesn’t allow AOBs yet they sign one anyway, the AOB assignee must hold policyholders harmless from all liabilities.
- Emergency repairs: Capped at $3,000 or 1 percent of the coverage limit in a homeowner’s policy.
- AOB assignee rules: A company holding an AOB contract must follow new rules: They must give documents to insurers when requested, answer questions under oath and agree to participate in alternative dispute resolution.
- Pre-litigation requirements: If an AOB firm wants to file a claim against an insurer, they must inform the homeowners before filing the lawsuit.
- Insurer requirements: If an AOB assignee plans to sue a property insurer and submits a pre-suit notification, the insurer has 10 days to respond with a settlement offer or other alternative, such as a new appraisal or other form of dispute resolution.
Will property insurance rates go down?
HB 7065 does not force private property insurers to lower prices, but most of them have cited the high cost of AOB lawsuits as a major reason for rate-hike requests. As a result of this change in the way insurers operate and their new no-AOB policy option, private-market competition should lower overall rates and benefit Florida’s homeowners.
Under the bill, Citizens Property Insurance Corp. – the state-owned “insurer of last resort” – must lower its 2019 perils rate by the amount it will save under the legislation. Citizens currently has an 8.2 percent rate-increase request filed with the state, but spokesperson Michael Peltier says that request will be recalculated and resubmitted to Florida’s Office of Insurance Regulation.
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