State Farm/courtesy photo AOB involves policyholders signing over benefits to contractors, who then pursue payment from insurers — often leading to disputes and lawsuits. (Photo: State Farm)

State Farm Florida Insurance Co. is asking a judge to block disclosure of detailed company information related to “assignment of benefits,” an insurance practice at the center of fierce political and legal debates in recent years.

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State Farm filed a lawsuit last week in Leon County circuit court after the state Office of Insurance Regulation received a public-records request for information that State Farm and other insurers were required to submit to the state. The information includes several years’ worth of data about the handling of property insurance claims and assignment of benefits.

Trade secret?

State Farm contends the information is a trade secret and is exempt from disclosure under Florida’s public-records laws. A state trade-secret law allows companies to ask courts to keep information confidential.

“The OIR’s [Office of Insurance Regulation’s] public disclosure of State Farm’s data call responses, which were submitted to OIR under a claim of trade secret, will cause State Farm immediate and irreparable injury because public dissemination of the documents and information will destroy the trade secret value of the compiled information which gives State Farm a competitive advantage in the Florida property insurance market,” the lawsuit said.

Driving up property insurance premiums

Assignment of benefits has been a highly controversial issues in recent years, with insurers arguing that litigation and fraud involving the practice are driving up property insurance premiums. The issue has primarily focused on residential water-damage claims, though it also has extended to such issues as claims for vehicle windshield damage.

The practice, widely known as AOB, involves policyholders signing over benefits to contractors, who then pursue payment from insurers — often leading to disputes and lawsuits. Contractors and plaintiffs’ attorneys argue it helps ensure that damage claims are paid properly.

Amid heavy lobbying, lawmakers have debated making changes in assignment-of-benefits laws, but the House and Senate have not been able to come to agreement. Some senators, including Banking and Insurance Chairwoman Anitere Flores, R-Miami, have been openly skeptical of the insurance industry’s arguments on the issue.

The Office of Insurance Regulation in 2015 and 2017 issued data calls to insurers writing homeowners’ and dwelling-fire policies, according to the lawsuit. Generally, data calls are used to examine the activities of insurers.

Related: How false-water-damage claims are reaching crisis levels in Florida

The data calls required insurers to submit a wide range of information about claims and assignments of benefits. The 2015 data call, for example, collected information about each claim for water or roof damage closed by the insurers between Jan. 1, 2010, and Sept. 30, 2015, the lawsuit said.

The Office of Insurance Regulation received a public-records request last month from Elizabeth Tuxbury, a graduate student at Connecticut’s Quinnipiac University who, in part, sought the “underlying data” from the data calls. Tuxbury’s request was not limited to information submitted by State Farm, according to a copy attached to the lawsuit.

An attorney for the Office of Insurance Regulation notified State Farm that it would comply with the public-records request unless the insurer went to court under the trade-secret law.

Insurer could be harmed in several ways

The lawsuit, which has been assigned to Circuit Judge Karen Gievers, contends that the insurer could be harmed in several ways if the information is released.

“[The] data, in providing claim-level data broken down by ZIP code, would allow an insurer to identify AOB ‘hot spots’ in Florida that could then be used to tailor underwriting decisions in those areas,” the lawsuit said. “Another carrier could use State Farm’s data in conjunction with, or in lieu of, its own to evaluate where to write or not write insurance policies in such areas.

“The data has value to third party vendors such as water mitigation/extraction companies who might seek to contract with State Farm, or who are pursuing claims against State Farm. Claim-level data relating to how much State Farm has paid for such services in the past would be invaluable in negotiations with State Farm.”

Jim Saunders reports for the News Service of Florida. Contact hin at [email protected].