News & Resources

According to a February 5, 2016 South Florida Sun-Sentinel article, proposed legislative bills aimed at preventing insurance fraud in non-weather related water damage claims may not be approved for a fourth straight year. The potential for fraud is high with these claims as contractors frequently have homeowners assign to the contractors the right to recover benefits under the homeowner’s insurance policy.

There are multiple proposed bills: one in the House, one in the Senate, and an alternative bill. The House and Senate bills seek to prevent fraud by requiring contractors to notify insurance companies that their policyholders have assigned their post-loss benefits to a contractor for home repairs. The House and Senate bills also require warnings that the policyholders are aware they are giving up their policy rights to the contractor and that the policyholder has a right to cancel that assignment within three days.

The Florida Association for Insurance Reform supports the alternative bill, which forbids contractors from offering referral fees, requires contractors to provide the insured with a detailed, itemized estimate of the cost for the repairs, and allows only a public adjuster and no other non-lawyer to explain the insurance coverages to policyholders. The concern with referral fees is that they are a form of legal kickbacks that encourage insurance fraud by inflating repair costs. Plumbers are receiving high referral fees for steering contractors to homeowners who have suffered water damage. The higher referral fees are driving up the cost of the claims as the contractors attempt to recoup that referral fee by running up the tab on the repair. In an attempt to curb this issue, the House bill would limit the reimbursement of emergency repairs to $2,500.00 and forbid referral fees.

Bronstein & Carmona, P.A. supports a bill that would protect honest policyholders by limiting the opportunities for fraud. Insurance companies must be allowed to contractually forbid the post-loss assignment of benefits from a policyholder to a contractor. Outlawing referral fees and capping reimbursement of emergency repairs at $2,500.00 are two additional ways of limiting fraud. Ultimately, fraudulent claims impact the ability of honest homeowners to reasonably afford homeowners insurance and for homeowner insurers to be able to offer affordable protection. Four years of legislating is far too long; a bill needs to be passed to protect  honest homeowners before fraud linked to non-weather related water damage claims becomes more prevalent and drives up costs to the point that coverage is unaffordable to protect the vast majority of homeowners who buy coverage to protect themselves in the event of catastrophe.