Florida's Assignment of Benefits Crisis: A Deep Dive into the Litigation Explosion

Understanding the Assignment of Benefits (AOB) Crisis

On December 11, 2018, the Insurance Information Institute (I.I.I.) published a report documenting Florida's assignment of benefits crisis – what the crisis is, how it's spreading, and how it's costing Florida consumers billions of dollars. An assignment of benefits (AOB) is a contract that allows a third party – a contractor, a medical provider, an auto repair shop – to bill an insurance company directly for repairs or other services done for the policyholder. The process is innocuous and common throughout the country. But as our report notes, Florida's unique legal systems richly rewards plaintiff's attorneys and vendors when they submit inflated bills to insurance companies and then file lawsuits when those bills are disputed.

The Staggering Rise in AOB Lawsuits

Not just a few lawsuits. Lots of lawsuits. The numbers are staggering. There were roughly 1,300 AOB lawsuits statewide in 2000. There were more than 79,000 in 2013, and nearly 135,000 through November 9, 2018, a 70 percent increase in just five years. Inflated claims and massive volumes of lawsuits have the predictable result of driving up insurance companies' legal costs. Insurers are forced to then pass those costs on to consumers. In the study, we estimate that Florida's auto and homeowners policyholders have paid about $2.5 billion more for insurance over the past dozen years to cover the increase in legal costs.

Protecting Yourself from the AOB Crisis

Many of these inflated bills and lawsuits are driven by a select number of contractors and their attorneys. Florida insurance customers can protect themselves – and their fellow citizens – by being very cautious when signing away their benefits under an AOB. According to a recent study, consumers who thoroughly understand the AOB process and its potential pitfalls are less likely to fall victim to inflated claims and lawsuits. It's crucial to read and understand the terms of any AOB agreement before signing, and to consider seeking legal advice if necessary.