Insurance Coverage and Bad Faith

Impact of Florida’s New Assignment of Benefits Law: HB 7065

On April 26, 2019, Florida Governor Ron DeSantis signed into law Florida House Bill 7065. The law, which took effect on July 1, 2019, was designed to reduce the amount of assignment of benefits (“AOB”) agreements that could be signed between entities and insureds. Governor DeSantis signed H.B. 7065 into law specifically to discourage so many AOB agreements from being signed in order to prevent the abuse of insurance companies and the legal system. So, what kind of an impact has H.B. 7065 and Fla. Stat. 627.7152’s provisions had on Florida’s insurers and court system since being enacted nearly a year ago?

An AOB agreement is formed when an insured signs a contract with a third party, usually a contractor, to step into the insured’s shoes and pursue rights against an insurance company under the insured’s policy. 

Florida has seen an uptick in AOB agreements being signed since Hurricane Irma (2017) and Hurricane Michael (2018), especially in the first-party property arena.

In particular, Citizens Property Insurance Corporation (“CPIC”), one of the largest insurance companies in the state, has already reported that its near 44,000 policy holders have seen their premiums drop in 2020. In regards to the legal system, Florida courts have seen less first party property cases being filed in 2020. As of November 2019, CPIC alone had seen their caseload drop from 2,000 to 1,750 suit per month.

The Florida Legislature’s work to curb back AOB agreements is not done, however. During the 2020 Legislative Session, Senator Jeff Brandes already introduced two bills that would target first party litigation abuse and AOB agreements. Most notably, these bills would limit the maximum fee a court may award the assignee in AOB cases, and revise requirements for the Civil Remedy Notice (CRN) provided to insurers and the Department of Financial Services.

This new legislation would make it much more difficult to file CRN(s), and therefore, bad faith suits would also be on the decline. In short, insurers need to be paying close attention during the next legislative session to see what these bills and new issues with COVID-19 bring about.

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