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JMI analyst at Florida Chamber confab: Legal climate “horrific” for insurers

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Amid a day of sometimes narrow, technical discussion among Florida insurers and industry advocates, The James Madison Institute’s Sal Nuzzo pulled few punches when it came to that familiar insurance enemy the trial lawyer, abetted by state government and the courts.

Nuzzo cited annual reports by the Institute for Legal Reform that showed Florida slipping in its legal climate for business rankings from 33rd in the nation in 2002 to 44th in 2015.

Nuzzo and his R-Street colleague had an answer as to why that is that pleased the crowd at the Florida Chamber of Commerce’s annual Insurance Summit: assignment of benefits.

“What’s occurring has become a cottage industry, a legal con that seeks to leverage existing laws and regulations to take advantage of consumers, providers, regulators, and enrich none but a very few bad actors,” Nuzzo said, hitting a note familiar to the insurance agents and C-suite executives on hand.

“The majority of abuse comes in where unscrupulous service providers prey on individuals in their most vulnerable setting,” laying out the narrative contained in the Chamber’s new ad released Tuesday morning. “Their home has been flooded, or some other disaster has hit, and their primary concern is getting the work done. Vendors acting in bad faith get the owner to sign over benefits as a condition for conducting the work, inflate bills, and then sue the insurance company when payment isn’t rendered immediately.”

How bad of a problem is this in Florida, according to Nuzzo?

“Between 2004 and 2005, during the last major storm season, there were 9,400 AOB-related suits filed in Florida. Between 2013 and 2014 that number had exploded to 92,000 suits. A tenfold increase in abuse that’s hitting policyholders in the wallet. Policyholders in Miami-Dade County will see a rate increase in 2016 averaging 7.6 percent. Now, if Miami-Dade were in line with the rest of the state, policyholders would actually see an 8.5 percent DECREASE in premiums. The rate increase is effectively a ‘trial lawyer tax’ amounting to a 16 percentage point rate swing.”

Nuzzo offered a prescription equally copacetic to the Chamber and its advocates, whom CEO Mark Wilson said Tuesday afternoon will pursue a bill to change the state’s assignment of benefits laws for the second time in as many years.

“If the benefits are to be assigned to a third party, that third party should be bound by the same requirements in the policy as the original policyholder – such as requirements for establishing proof of loss, supporting documentation, and submitting to examinations under oath,” proposed Nuzzo, who worked with R-Street Florida director Christian Camara on the policy brief.

Nuzzo also suggested still further restrictions to rein in attorneys, the villains of his narrative, including “opt-out periods” so consumers who may have felt compelled into signing over benefits can change their minds.

“Most importantly, the rules for attorney fees in assigned benefit disputes should be revisited. While consumer access to prevailing party or one-way attorney fees should be preserved, trial lawyers should not be able to avail themselves to this when representing vendors as a result of an AOB suit,” Nuzzo said.

“If a vendor’s suit truly has merit, there will exist, especially in Florida, a plethora of attorneys willing to take the case on for ordinary contingency fees.

“It is up to us – as policymakers, as advocates and as industry leaders – to continue to develop solutions to the challenges we face that have encouraged fraud and abuse for far too long,” Nuzzo said.

Ryan Ray writes about campaigns and public policy in Tampa Bay and across the state. A contributor to FloridaPolitics.com and before that, The Florida Squeeze, he covers the Legislature as a member of the Florida Capitol Press Corps and has worked as a staffer on several campaigns. He can be reached at ryan@floridapolitics.com.

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