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Assignment of benefits abuse has become such a well-known problem in the state of Florida this year that it now just goes by the nickname “AOB.”

The issue with AOB comes from when a policyholder suffers a loss, such as water damage to their home, and then signs over their insurance policy to the person repairing the damage. Repair contractors utilizing the AOB on behalf of the insured often work with attorneys who then sue the insurance company over the claim

Florida’s one-way attorney fee statute has encouraged these suits because the insurance company is typically left paying the attorney fees. In many cases, policyholders don’t know the lawsuit has even been filed.

Florida’s state-run insurer Citizens has been the most affected by this abuse. Citizens CEO and Executive Director Barry Gilway says that the negative impact on the pricing of property insurance and availability of coverage in Florida is getting worse. Gilway said while the gross misuse of the AOB form is a major component of the issue, the problem has really become a litigation issue relating to all non-wind water claims.

“The situation is deteriorating even further at Citizens,” Gilway told Insurance Journal. “Despite a book of business that has stabilized at around 490,000 policies, we are now projecting the number of lawsuits received each month will grow from 900 this year to over 1,000 in 2017. And yes, it is the same 10-15 firms that continue to be responsible for 60 percent of the litigation across the state.”

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