“Partial Assignments” can be Fatal for Restoration Contractors’ Attempts to Collect Insurance Payments, and Increase Liability for Insureds

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Homeowners and restoration contractors who attempt to enter into a partial assignment of insurance benefits should know that partial assignments for the contractor’s services have repeatedly been found to be invalid contracts in Florida courts.  An invalid assignment contract typically results in the homeowner remaining 100% responsible for paying the contractor for the services performed on the home.  This is because the insurance company is not required to honor true partial assignments and courts will not enforce an invalid contract.

Sometimes insurance companies will say that a valid, complete assignment is just a “partial assignment” because the insurance company thinks both the policyholder and the contractor are trying to collect payment for the services the contractor performed.  However, this is not what either the policyholder or the contractor intended in the assignment of benefits.  Once the policyholder assigns the rights and benefits to the contractor to allow direct billing and collect payment for the services the contractor performed, the policyholder no longer has any rights or interest in collecting payment for services performed by that contractor.  The policyholder transferred those rights and interests to the contractor, so only the contractor is entitled to collect insurance payment for their invoice.

The assignment of benefits should state that the policyholder assigns and transfers “any and all insurance rights, benefits and proceeds under any applicable insurance policy” to the restoration contractor.  It should be clear that the policyholder has made a complete assignment of benefits to the contractor and not a partial assignment.  This is because Florida courts have held that only one entity “owns” the cause of action against an insurer at any one time and the one that owns the claim must bring the action if an action is to be brought.  The reasoning is that in the case of a partial assignment, if both the policyholder and the contractor own the rights to collect payment for the contractor’s services, the insurance company is subject to multiple suits or claims for the same amount due.

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Slide from Cohen Battisti’s “Insider Secrets” Slideshow

In a typical property damage insurance claim where a policyholder hires a contractor, the policyholder may assign and transfer the rights and benefits to collect payment for its services to the contractor in exchange for the contractor not requiring immediate payment from the policyholder at the time services are provided.  The policyholder still remains responsible for amounts owed that the insurance company does not pay in benefits.  Once the assignment takes place, the contractor owns the claim only for the value of the services they performed, and has the policyholder’s permission to directly bill the insurance company for payment of these services.

If an insurance company does not issue full payment to the contractor for its services performed after receiving a proper assignment of benefits and the contractor’s invoice, and after certain conditions are met, the contractor can proceed to collect payment directly from the insurance carrier, and if that fails, then to file suit against the insurance company.

The bottom line is that with a complete assignment of insurance benefits given to a contractor for collecting payment for services they performed, the contractor is the only owner of the claim for their services rendered.  It is important to avoid partial assignments because it may not be found valid and may not be enforced in a court of law.  Moreover, with a complete assignment given to a contractor for services rendered, the policyholder still, always maintains the rights to collect benefits for any damages they have which are not related to the contractor’s services performed.  The list is long but can for example include payments for additional or supplemental property damage that needs repairs in the same claim, or for additional living expenses.

If you have any questions about an Assignment of Benefits or partial assignments, consult a licensed Florida attorney.  At Cohen Battisti, we handle these assignment issues every day regarding insurance disputes and want to help you get paid.

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Florida Enjoys 8th Year with No Hurricanes, but no Break for Homeowners Insurance

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Florida has survived some of the biggest hurricanes in U.S. history, but this year marks a record eight hurricane-free seasons.  No one seems to be enjoying this good fortune more than Florida property insurance carriers.

Despite escaping payment for hurricane claims for the last eight years and a 20 percent reduction in the cost of reinsurance this year, 69 percent of the rate requests that insurance companies filed with Florida Office of Insurance Regulation (OIR) were for rate increases.

State Farm, for one, hiked its rates by 6.3 percent in October although in the third quarter it reported $126 million in underwriting profits.  State Farm says it uses its rate increases to purchase additional reinsurance.  According to state regulators, Florida insurance companies must maintain all appropriate insolvency standards.  Why continue to raise premiums to cushion reinsurance reserves that already exist instead of passing on savings to policyholders?

Florida’s Chief Financial Officer, Jeff Atwater, requested answers from state Insurance Commissioner, Kevin McCarty on why homeowner insurance rates have not seen a reduction, generally, when costs to insurance companies have gone down.  McCarty’s report was due to be released on Dec. 18, but he asked for an extension until Jan. 15.

Not only are Floridians paying more in premiums when there have been no major storms, they are paying the highest rates in the country.  A recent report by the National Associate of Insurance Commissioners (NAIC) showed that the average rate for a Florida homeowner’s insurance policy is $1,933.  Louisiana is the second-highest, with an average $1,672.  The national average rate is $978.

The NAIC’s annual report contains insurance rates from 2011, which was the most recent year with data available.  Notably, the average rates do not reflect the more recent insurance increases Floridians faced in the last two years.  The trend of state regulators consistently approving rate hikes does not show signs of slowing down.

Floridians Face Surging Rate Hikes in National Flood Insurance Program

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The National Flood Insurance Program (NFIP), which is supervised by the Federal Emergency Management Agency, is set to increase premiums in 2014.  The cost is steep for Florida, which holds 37 percent of the federal flood insurance program’s policies.

Homeowners who are renewing their insurance face skyrocketing premiums, up to 20 percent in communities like Pinellas County.  he high premiums are a result of changes to the NFIP, being implemented by the Biggert-Waters Flood Insurance Reform Act.

With Florida having more coastline than any state, Floridians have more flood policies and pay more into the program.  The flood insurance rate increases affect Florida home sales and other title transfers. Although Florida theoretically stands the highest chance of flooding, Hurricane Katrina and Superstorm Sandy led to more NFIP claims being made in other states than Florida.  Not only does Florida have the highest number of subsidized flood insurance policies, it is the state with the highest exposure to pay into claims, at $475 billion.  Texas and Louisiana have the second and third highest exposure, at $162 billion and $112 billion, respectively.

ImageCourtesy of NRDC

According to a recent report by the Center for Competitive Florida, which analyzes the changes in the NFIP, Superstorm Sandy claims were estimated at up to $15 billion.  Comparatively, Florida had $407 million in Tropical Storm Isaac claims in 2012.

Another study, conducted by the Wharton Center for Risk Management and Decision Processes, compared the amount of claims paid to the amount of premiums collected and revealed that Florida paid $3.60 for every dollar NFIP paid in a flood claim anywhere.  The study showed that 11 states received more in payouts than was paid in premiums by the states’ policyholders over the course of 30 years.

Currently, the NFIP is $24 billion in debt. Thus, Congress passed the Flood Insurance Reform Act.  The goal of the reforms is to reduce the debt by eliminating subsidized rates on older homes that don’t represent the properties’ true flood risk, and make the program more stable.  Previously, rate increases were capped at 10 percent, but some Floridians risk paying four or six times their current rate, or even more.

Florida legislators are attempting to get a delay or roll back of the new rates passed before the session closes for the year, but Congress has yet to agree to delay any changes to the implementation of the Biggert-Waters Flood Insurance Reform Act.

Itsaboutjustice.law

Universal Property and Casualty agrees to pay $1.2M Fine, End “Post-Claim Underwriting”

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The days of Universal Property and Casualty Insurance Company’s now well-known “post-claim underwriting” practices, which led to many homeowner’s having their property damage claims denied or have their policies canceled, and without the required notice of cancellation, are over.  The property insurance giant has agreed to implement corrective action, change its policies and procedures and pay the $1.26 million fine ordered by Florida’s Office of Insurance Regulation.

This insurance company’s unjust denial of claims and cancellation of policies due to improper handling of claims resulted in numerous consumer complaints that were eventually brought to the attention of Florida’s Insurance Consumer Advocate, who at the time was Robin Westcott.  The Insurance Consumer Advocate worked with the Office of Insurance Regulation, the agency responsible for overseeing that insurance companies are following proper procedures, to investigate the complaints that consumers had against Universal.  The investigation revealed that Universal had been using their customers’ credit history information as a basis to issue denials on property damage claims, well after the time when policy underwriting was completed.

Essentially, Universal had been issuing policies and collecting insurance premiums after only conducting a partial underwriting of insurance policies, and then waiting until a homeowner filed an insurance claim to finish the process.  In many instances, Universal alleged that the reason a claim was denied or a policy cancelled is because during the claims handling process, was based on a misrepresentation made by a homeowner on an insurance application.  This would include, for example, if homeowners did not disclose a prior lien or judgment on the insurance application.  Such information is publicly accessible in county records, and easily obtainable by an insurance company during the original policy underwriting process.

In May 2013, the Office of Insurance Regulation issued an Order with its findings that Universal had unnecessarily caused delays in paying claims to their customers, as well as denied claims and cancelled policies following the improper “post-claim underwriting” practices and in violation of Florida Statutes. Insurers are required to return unearned insurance premiums to the policyholder within fifteen days of the policy cancellation, and are required to give the policyholder proper and timely notice of the cancellation

Universal was ordered to pay $1.26 million in administrative fines as a result of the investigation conducted.  Initially Universal challenged the Prior Order, but in October 2013, it signed a Consent Order, and agreed to implement changes to its claims handling and underwriting practices, as well as pay the fine.  Universal will review 262 claims it previously denied on the basis of application misrepresentations.  After Citizens, Universal is the second-largest property insurer in Florida, with more than 542,000 policyholders.

See the Consent Order in full.

Citizens’ Litigation Costs Tailspin in Sea of Claim Denials and Dropped Policies

Citizens’ 1.2 million policyholders should be outraged.  A recent report revealed that Citizens collects $2.2 billion in annual premiums, but monthly, pays an average $2 million in plaintiffs’ attorneys’ fees for lawsuits filed due to Citizens’ failure to pay insurance claims.

Over the past three years, Citizens paid more than $16 million to plaintiffs’ lawyers who prevailed in disputes over claim denials, coverage, and payment issues.  It is estimated Citizens spends more than $30 million per year defending these lawsuits, although Citizens reported that data was not yet available.

Citizens’ litigation costs have skyrocketed as the number of homeowner claims have increased, particularly in Miami-Dade, Broward and Palm Beach counties, along with the insurer’s claim denials and the delays in claims handling and payment affecting policyholders.

But not many policyholders will remain with Citizens for long if Citizens continues to have its way.  Florida’s insurer of last resort received approval from the Office of Insurance Regulation to shed 400,000 policies by November and another 200,000 policies in December.  The policies are being transferred to several other private Florida insurance companies, and policyholders will have the option to stay with Citizens or switch to the private insurer.

“I think this practice is outrageous,” states Harvey V. Cohen, managing partner of Cohen Battisti, Attorneys at Law.

President and CEO of Citizens, Barry Gilway, calls the reduction in policies an “unprecedented success.”  Notably, Citizens also just received approval from the Office of Insurance Regulation to increase premiums next year by an average 6.3 percent.  This is lower than Citizens’ original request for a 7.9 percent increase.

With millions of dollars going toward plaintiffs lawyers who successfully bring challenges against Citizens for breach of contract for claim denials and delays, and the ongoing costs of defending lawsuits, Floridians and their government representatives should keep a close eye on Citizens and expect more grand-scheme changes in both insurance policies and Citizens’ internal policies in the coming months.

Contact Cohen Battisti, Attorneys at Law, if Citizens or any insurance company has denied, delayed or defriended your claim.

Fairness in Florida Homeowner’s Insurance Claims Handling

The Homeowners’ Policy & Claims Bill of Rights Working Group is tackling issues such as setting parameters for examinations under oath, and policy provisions for mediation, appraisal, and an insurer’s right to repair beginning with two workshops held in Tallahassee on July 17 and July 18, 2013.

Working group participants include consumer organization advocates and representatives for some of Florida’s major insurance companies. Florida Insurance Consumer Advocate Robin Smith Westcott, appointed by Florida Chief Financial Officer Jeff Atwater, is chairing the working group. During the workshops, Westcott said she was concerned with an insurance company checking homeowners’ applications and credit reports after a claim was made, only to deny the claim and void the policy.

Denials, significant reductions in payment of valid claims and delays in claims handling, which hurt vulnerable homeowners, are some of the insurance industry abuses the working group hopes to remedy. The goal is to provide better consumer education and changes to Florida law through a comprehensive, collaborative report that will offer recommendations for improvements either administratively or through new legislation, along with a review of the Policyholders’ Bill of Rights.

The working group aims to have a bill package presented to lawmakers for pre-session committee meetings set to take place in September and October.

Watch the full-length 7/17/13 workshop and 7/18/13 workshop on The Florida Channel.

Article Written by Cohen Battisti, Attorneys at Law.

The Truth About Insurance Companies

A True Story:

Back in 2006, a friend of mine and his wife were moving to Florida from the Midwest, and decided to purchase a home in Central Florida.  To their surprise, although a number of carriers offered coverage, only one was willing to offer coverage to include hurricane damage.  When he asked his insurance agent, “Why won’t anybody offer me hurricane coverage in Florida?” the response he received was, “Simple; because there’s hurricanes in Florida.”

Although humorous, this anecdote is representative of the powerlessness many homeowners feel in both purchasing insurance and reporting covered losses.  On one hand, residential insurance is a social institution, a public necessity that anyone who purchases a home through a mortgage must obtain.  There is no choice.  On the other hand, insurance companies are profit-driven businesses, not public organizations, and as such their ultimate loyalty lies with stockholders, not policyholders. 

Insurer Advantage:

Likewise, the insurance policies themselves are equally dictatorial.  The contract terms are non-negotiable.  The pricing for various coverage’s are non-negotiable.  The decision by insurance companies to admit coverage, deny coverage, or issue payment in full for repair work is absolute (outside of litigation).  The contract itself, a voluminous document riddled with legal jargon and often vague meanings even experienced attorneys dispute, is virtually incomprehensible to homeowners.  And to exaggerate the already-uneven playing field homeowners’ face, private insurance companies are fundamentally driven by profit incentives, whereby the less homeowners are paid, the more the company benefits.

So if an insurance company decides to deny or underpay a homeowner’s claim, what are their options?  In most states, their only choices are to hire an attorney or public adjuster who will work on a percentage contingency basis (where the attorney takes a percentage of any amount the homeowner recovers), or hire an attorney who bills based on their hourly rate; either way, the homeowner will likely sacrifice thousands of dollars in the hopes they might recover insurance benefits which they should have provided already.  The general result is, if a smaller claim is either denied or underpaid, the homeowner has no practical way to recover what they’re owed or otherwise contest the insurance company’s decision.

Sunshine State Levels Playfield:

Fortunately, in my home state of Florida, the legislature has provided homeowners with a few mechanisms which help even the playing field between homeowners and insurance companies.  One of the most significant of these is Florida’s “fee-shifting” statute.  Under Florida Statute Section 627.428, if a homeowner recovers money from their insurance company for a wrongfully underpaid or denied claim, there are entitled to have their attorney’s fees and costs paid in addition to any amount they recover for their loss.  Such laws are essential to empowering homeowners to dispute a wrongly denied or underpaid claim, and stand up for their contractual rights.  As such, our firm strongly encourages other states to join Florida in enacting fee-shifting statutes to help empower homeowners to have their voices heard by the insurance industry.

Providing homeowners with litigation fees and costs when they recover against an insurer is empowering in multiple ways. Homeowners have the opportunity to obtain top-notch legal representation without having to sacrifice benefits they’re properly owed.

Legislative Action Helps Close the Gap:

Likewise, insurance companies have an incentive to consider their coverage decisions a little more thoroughly, with the knowledge that improper payment or denial could result in paying additional thousands of dollars in the homeowner’s legal costs and fees.  And, of course, from a Plaintiff attorney’s perspective, there is nothing that makes us happier than being able to recover the full amount our clients are owed without having to take a penny of their actual benefits.

In sum, although the playing field between insurers and homeowners is far from level, states that choose to adopt similar “fee-shifting” laws are providing an essential tool for homeowners to defend themselves, their homes, and their families from insurance companies who otherwise have insurmountable money and resources at their disposal.  In a time when homeowners insurance is not merely a product to be purchased at leisure, but an essential, necessary, and mandatory institution of our society, “fee-shifting” laws may be the most effective path to rectify the clear power imbalance between insurers and homeowners.

By attorney Michael Grossman

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