Where the damage is in water-damage claims
What happens when you let a third party handle your insurance claim? The answer, in a symbol, is $. Insurers have been sounding alarms about assignment of benefits for a couple of years now, and the issue is ever more in the spotlight. A recent editorial suggests it is time to bring water damage abuse under control.
Here’s what’s been happening: A homeowner with a water damage claim is convinced by a contractor to assign the insurance benefits to him. The contractor stands in the shoes, so to speak, of the insured and deals directly with the insurance company. The problem with that is it can make the claim needlessly more expensive because it links in (sometimes needlessly) additional contractors and leads to (oftentimes needless) litigation. The practice has become so prevalent that it has caused an insurance rating agency to declare an “uncertain operating environment” and advise some insurers to infuse more capital into their operations. It’s like a man-made hurricane messing with the financial stability of the marketplace.
So, unscrupulous people have seen a “hole in the dike” opportunity and a way to catch the money pouring out. Where’s the money? Well, if a homeowner has a legitimate water damage claim and someone else handles the details, that someone else can charge whatever he or she wants and bring in a whole bunch of other people to get in on the work. Then, if the insurance company balks at paying an exorbitant series of bills, they bring in the lawyer to sue. Suing insurance companies has some built-in incentives in Florida because there is something called one-way attorney fees. That means that when someone is standing in the shoes of the claimant (the homeowner), they get the benefit that was intended for the claimant, which is not having to pay legal fees. Again, in a symbol: $ and $$$.
The plight of Citizens Property shows the financial drain of water-claim abuse. Citizens reports that five years ago litigation for water claims comprised about 15 percent of its lawsuits; in 2016 it was 50 percent. Who ultimately pays for this abuse? The consumer eventually does, with higher insurance bills on the way if the leak in the dike remains.