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Assignment of benefits claims put massive strain on homeowners insurance industry in FL

Under Florida law, homeowner’s insurance policyholders are able to assign the right to seek insurance reimbursement to third-party contractors. Contractors who have reimbursement rights assigned to them are then able to seek compensation from the insurance company for repairs, such as leaky pipes, and may file claims against the insurer if payments are denied or minimized.

One of the criticisms of assignment of benefits rights is that it allows dishonest contractors to overinflate the compensation due to them or to submit fraudulent claims. When this happens, it is argued, the insurance company and the contractor are left to resolve any disputes without the involvement of the consumer. 

Another criticism is that assignment of benefits actions are putting a massive financial strain on the insurance industry. The fact that the number of assignment of benefit claims has increased from 405 in 2006 to 28,000 in 2016 shows just how big the problem has become. One of the consequences is increasing premiums and insurance costs. According to one figure, insurance companies will have to increase insurance rates 10 percent every year to keep up with the growth of assignment of benefits claims, which would result in burdensome costs for homeowners and could lead to insurers dropping out of the Florida market.

Insurers have blamed fraud for the problem, but state regulators say that insurers are often too quick to jump to conclusions and that a legislative fix to the problem is only going to be possible if hard data is provided and carefully examined.   

In our next post, we’ll continue looking at this issue, and how an experienced attorney can help a contractor pursuing an assignment of benefits claim or dealing with a related dispute. 

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