The Assignment of Benefits Turning Point in Florida Homeowners Insurance

Florida Homeowners Insurance Claims and Litigation Handbook

In a few years, we are all going to look back on these last few months as the biggest turning point in assignment of benefits-related homeowners insurance claims in Florida.

You might be surprised as to where we believe the new turn will lead us.

We’ve seen this before in the Florida homeowners insurance industry: late notice hurricane claims, mold claims, and sinkhole claims. Advocates for one side take it too far, and it gives the insurance industry just enough ammunition to get the legislative change they need.

We believe that this just happened for water mitigation AOB claims in Florida. We’re about to tell you why.

First, some housekeeping:

If you don’t know what we are talking about, then please review our prior articles here:

AOBs: Nothing But the Facts

Five Ways to Solve the Assignment of Benefits and Water Damage Restoration Insurance Problems 

Recent News on the Florida Assignment of Benefits Issue in Homeowners Insurance

Here are the three key events that have occurred in the last couple of months:

Florida’s legislature failed to act on the insurance industry’s efforts to take legislative action

Click here for Scott Johnson’s article on the death of that bill.

The Fourth DCA issued its opinions rejecting insurers’ arguments against the ability of a water mitigation contractor to obtain AOBs from homeowners.

Click here for a good analysis of those decisions from Bressler Amery & Ross.

In short, the Fourth DCA looked at insurers’ newest arguments against the assignability of an insurance policy. The insurers’ attorneys crafted unique perspectives on an issue that most believed had been settled for quite some time.

Ultimately, the Fourth DCA reviewed the same provision that had been in these policies for decades. Naturally, the Fourth DCA issued the same ruling on that provision that other courts had issued: homeowners can assign their claims.

Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook and Litigation Data Reports:

Before we go on, if you are in the Florida homeowners insurance claims industry and are looking for a guide with the key cases, strategies, laws, attorneys, and adjusters, or if you’re looking for Florida litigation data reports, please visit this page to learn more about our Florida Homeowners Insurance Claims and Litigation Handbook.

The First DCA recently determined insurers cannot rewrite the insurance policy to limit the ability of a homeowner to assign a claim.

Here is a copy of this decision:

Security First v. OIR

Let me repeat the overall conclusion of the First DCA’s decision: insurers cannot rewrite their insurance policy to limit the ability of a homeowner to assign a claim. Why not? Because the new provision would confuse the policyholder.

This leads us to some logical questions here:

  • Does the First DCA and OIR think that homeowners understand the current Florida law on AOBs?
  • Does the First DCA think Florida homeowners consider whether a claim is assignable when they call a contractor to help them dry out their home?
  • Couldn’t we just email the new provision to the law firms representing these AOB contractors and ask them to forward the email to their clients – the water mitigation contractors?
    • Once they know it’s the law, they wouldn’t waste their time trying to get an unenforceable AOB from homeowners.
    • They would ask to be paid.
    • The homeowners would never even know anything happened.
    • How could this be confusing to homeowners?

Setting aside this very unique “confusion” standard, the First DCA ignored Security First’s best argument: that old Florida law on an old insurance provision doesn’t apply to a new insurance provision.

The First DCA didn’t waste one word addressing this logical follow up. Instead, the First DCA said that the entire issue is for the legislature to decide.

Let’s back up for a moment. Here is a quick synopsis of how homeowners insurance statutes impact insurers’ abilities to write their policies: insurers have to offer the minimum coverage required by the legislature. They can offer more, but they can’t offer less. Viewed another way, if there is not a statute with a minimum coverage on an issue, insurers should be free to amend their policy any way they want on that issue.

So where is the bare minimum coverage in Florida statutory law that restricts Security First from taking this action? Nowhere!

The legislature has already addressed AOBs. The first sentence of Fla. Stat. 627.422 states that “[a] policy may be assignable, or not assignable, as provided by its terms.” (Emphasis added!).

Why is it that we need to bother the legislature again? It sounds pretty clear that the legislature has already addressed this exact issue: insurers can write whatever they want in their insurance policy with respect to the assignment of benefits issue.

What else does the legislature need to say about this to convince a court that an insurer may rewrite its policy to limit AOBs?

We could dive even deeper into this legislative obstacle that the First DCA placed in front of Security First; however, if you want more information on this, the best source would be to review Security First’s arguments here:

Security First v. OIR Brief

Let’s think about what the First DCA might be saying here: if insurers have a provision in their policy that results in an adverse ruling, they cannot change the provision without the legislature passing a law.

One more time: if it turns out that an insurance policy provision isn’t good for the industry, insurers need to change the provision before getting any adverse rulings on the provision.

Otherwise, homeowners would be confused …

Well, if they are confused, homeowners wouldn’t be alone. Everyone is confused about this ruling.

Accordingly, Florida lawyers and lawmakers have hit the insurance industry hard. Not once, not twice, but three times in the past couple of months. What does this mean as we move forward?

This is Another One of Those Turning Points

We can’t help but draw the parallels between this and many similar issues in recent Florida homeowners insurance history, including late notice hurricane claims, mold claims, and sinkhole claims. If you don’t know what we’re referring to, then that answers your question. Eventually, claimants continue to push and push insurers until the problem becomes so large that insurers have enough leverage to solve it.

It’s pretty obvious that the AOB proponents just pushed insurers to that brink.

First, the AOB industry just obtained a ruling that says insurers cannot amend their insurance policies. This is something that no insurer is going to stand for.

Second, insurers are finally starting to collect extremely valuable data showing evidence of how much these AOB claims cost every Florida homeowner in policy premiums.

Now that Florida lawyers and lawmakers have forced insurers’ hands, we believe there will be much more creative solutions to the AOB problem next legislative session, and mountains of data-based evidence to support the urgent and compelling need to do something.

If you have any questions about this article or anything else Florida homeowners insurance related, please contact me.