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Editorial: Time to bring water damage claims abuse under control


It is possible, or even likely, that Florida is at a critical juncture when it comes to dealing with abuse of the legal right called “assignment of benefits,” or AOB.

A quick reminder: AOB is when distressed homeowners sign contracts for emergency repairs (such as a broken water pipe), typically without knowing they’ve forfeited all of their insurance rights and benefits — including the right to sue. This allows the contractor to bill the insurance company directly, and get the proceeds directly.

These AOBs have understandably grown in popularity because they allow homeowners to hire contractors quickly to repair damage and, for the most part, can help force insurers to properly pay claims.

But they’ve also become increasingly controversial as unscrupulous attorneys, and contractors and repairmen defraud the system by inflating costs — mostly on water damage claims —and filing lawsuits when insurers balk at paying.

The Florida Legislature has played at fixing this problem for the past few years as the pace of these water damage claims picked up — jumping 50 percent from 2010 to 2016 at Citizens Property Insurance Corp. alone.

We understand and applaud lawmakers’ caution toward making broad, sweeping changes to a decades-old system created to help desperate homeowners. But they should understand that doing nothing has only allowed the problem to fester and put hundreds of thousands of homeowners, already paying the highest average insurance rates in the country, at risk of paying more.

What’s at stake are “10 percent annual rate hikes for the next many, many years,” Citizens CEO Barry Gilway told the Post Editorial Board on Wednesday.

Gilway, and Citizens governing board chair Chris Gardner, said that unchecked abuse of AOBs by a cadre of contractors and lawyers — especially in Palm Beach, Broward and Miami-Dade counties — will cost Citizens an estimated $100 million loss in its Personal Lines Account (PLA) this year. And that number could rise to $200 million in 2018, he added.

“Moreover,” Gilway warned, “we now see this problem spreading beyond South Florida.”

Plaintiff’s attorneys and contractors argue this is all a bit of hyperbole on the part of Citizens. And the insurers have indeed been singing this song to whoever will listen for a couple years now.

Yes, there are “bad actors” in the system. But focus on those bad actors, namely unregulated water remediation companies that do the cleanup work when a washing machine overflows or water pipe breaks, attorneys and contractors say.

Also, Citizens has other problems that are likely contributing to its financial status. As the Post’s Charles Elmore pointed out previously, the state’s insurer of last resort is still carrying an administrative cost structure built for about 1.5 million customers despite having shrunk to less than 500,000, and it is spending nearly $300 million a year on private reinsurance despite a $7 billion surplus and the backing of a state hurricane fund.

And Florida Chief Financial Officer Jeff Awater didn’t do Citizens any favors on Thursday, when he told attendees at the Florida Chamber Insurance Summit, that his office has was not seeing a significant surge in cases involving water damage.

But there are areas of agreement between the sides, such as notification to the insurer in three to five days after a contractor has agreed to work on a claim.

Gilway and Chambers said unlike in previous years, all insurers are backing a bill being drafted by Sen. Dorothy Hukill, R-Port Orange. The state’s Office of Insurance Regulation and Insurance Consumer Advocate Sha’Ron James are taking the lead on pushing the bill during session.

Good. Because this isn’t about any of them. This is about homeowners. And it’s time for everyone to finally get on the same page.



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