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Florida Gov. Ron DeSantis’ proposed reforms on insurance fraud and abuse of rights, announced this week for consideration during the legislative session beginning in March, would build on measures approved in the final weeks of 2022 and go a long way in addressing the Afford insurance crisis of the state.
Legislation passed during the 2022 special session eliminated unilateral attorneys’ fees and assignment of benefits (AOB) agreements for property insurance claims. Gov. DeSantis’ proposal would go further and eliminate these mechanisms and “attorney fee multipliers.” all lines the insurance.
“For decades, Florida has been viewed as a legal hell hole due to excessive litigation and a legal system that has benefited attorneys more than victims,” DeSantis said in his announcement. “We are now working on legislative reform that will be more consistent with the rest of the state and will bring more businesses and jobs to Florida.”
Prior to the 2022 reforms, state law required insurers to pay policyholder fees of homeowners who had successfully filed claims and protected policyholders from paying insurers’ attorneys’ fees if policyholders lost. The legislation also eliminated AOBs – agreements in which property owners cede their claims to contractors who then work with insurers.
AOBs are a common insurance practice, but in Florida, this consumer-friendly convenience has long served as a magnet for fraud. The state’s legal environment — including some of the most generous attorney-fee mechanisms in the country — has encouraged sellers and their attorneys to solicit unjustified AOBs from tens of thousands of Floridians, perform unnecessary or unnecessarily expensive work, and then sue insurers who deny or dispute the claims.
As a result, Florida accounts for nearly 80 percent of the state’s homeowners insurance lawsuits, but only 9 percent of the claims, according to the state’s Office of Insurance Regulation.
Eliminating these two property claim mechanisms will address much of the insurance fraud in the state. Eliminating them for all lines would be a promising sign that the state is genuinely committed to tackling the root causes of the crisis.
The Florida insurance crisis did not come overnight, and it will take years to wring the effects of fraud and abuse of the legal system out of the system. Policyholders will not see any premium benefits in the foreseeable future. Task 1 is to “stop the bleeding” when insurers fail, leave the state, or stop writing critical personal insurance like auto and homeowners.
Triple-I has released a new Issues Brief on the crisis and the state’s efforts to resolve it.
Learn more:
Florida auto legislation following 2022 reforms suggests the state is serious about fixing the insurance crisis
Florida and Abuses of the Legal System Highlighted at JIF 2022
Fraud, litigation brings Florida insurance market to the brink of collapse
Florida has been removed from the 2020 Judicial Hellholes list
Florida’s AOB Crisis: A Microcosm of Social Inflation