Florida Supreme Court Invited to Resolve Assignment-Of-Benefits Controversy

Michael Morehead | Property Insurance Law Observer | December 5, 2018


At least two Florida appellate courts have directly contradicted each other on an increasingly-important question facing Floridians and the insurance industry. The question is as follows: “Are insurance provisions valid which condition the validity of third-party benefits assignments upon the written consent of all insureds and named property mortgagees?” The answer to this question is important because Floridian policyholders often assign their insurance rights to construction companies post-loss to receive services without up-front payment. The Florida Supreme Court was recently asked to answer this important question, and it is likely to weigh in, although it has not yet formally decided to do so.

Public Policy

Public policy concerns animate assignment-of-benefits (“AOB”) legal disputes in Florida. Florida construction companies and policy-holder attorneys argue that AOB is good for policy-holders because it allows them to immediately repair damaged property. However, insurance advocates contend that certain AOB limitations are necessary to mitigate abuse, fraud, needless litigation, and ultimately to minimize insurance premiums to policyholders.

A 2016 Insurance Journal article explained that unscrupulous contractors often obtain AOBs, submit inflated repair-cost claims to insurers, and then work closely with “highly litigious” trial groups to sue the insurers for denying these claims, whether in whole or in part. Amy O’Connor, Florida Fights Back Against Assignment of Benefits Abuse, Insurance Journal (Feb. 8, 2016). A 2018 article indicates that as a result, the number of AOB lawsuits in Florida has been “spiraling out of control,” from 405 lawsuits in 2007 to 28,000 lawsuits in 2016—a “68-fold increase.” Liam Sigaud, Florida Insurance Abuse Spiraling Out of Control, Pensacola News Journal (March 14, 2018).

Thus, the legal AOB controversy currently taking place in Florida is the tip of a much larger public policy iceberg. Because of the breadth and depth of the public policy considerations at play, even those Florida courts which have taken a side have done so on purely legal grounds, recognizing that the complex policy considerations are best addressed by the Florida Legislature. Unfortunately, the Florida Legislature has repeatedly tried yet been unable to resolve the present dispute.

Florida Appellate Courts are Split

Three of the five Florida District Courts of Appeal have weighed in on the validity of AOB conditions requiring the written consent of all insureds and named property mortgagees. The Second Florida District Court of Appeal (“Second District”) upheld the enforcement of such conditions without comment. See Biologic, Inc. a/a/0 Elizabeth Morgan v. ASI Preferred Ins. Corp., 238 So. 3d 769 (Fla. Dist. Ct. App. 2017). The Fourth Florida District Court of Appeal (“Fourth District”) upheld the validity of such conditions with detailed analysis. See Restoration 1 of Port St. Lucie v. Ark Royal Ins. Co., 2018 WL 4211750, at *1 (Fla. Dist. Ct. App. 2018). Finally, the Fifth Florida District Court of Appeal (“Fifth District”) has twice held such conditions to be invalid under age-old Florida common law. Sec. First Ins. Co. v. Florida Office of Ins. Regulation, 232 So. 3d 1157, 1160 (Fla. Dist. Ct. App. 2017); Restoration 1 CFL, LLC v. ASI Preferred Ins. Corp., 239 So. 3d 747 (Fla. Dist. Ct. App. 2018).

In invalidating the aforementioned AOB consent requirements, the Fifth District cited a 1917 Florida Supreme Court decision for the very general proposition that “it is a well-settled rule that [anti-assignment provisions do] not apply to an assignment after loss.” Sec. First Ins. Co., 232 So. 3d at 1158 (quoting from W. Florida Grocery Co. v. Teutonia Fire Ins. Co., 77 So. 209, 210–11 (1917)). However, the Fourth District subsequently disagreed, holding that the Fifth District overgeneralized the Teutonia Fire rule, which invalided a clause requiring the insurer to consent to third-party benefits assignments, not other insureds and property mortgagees. Ark Royal Ins. Co., 2018 WL 4211750, at *3.

AOB consent from an insurer constituted a needless restraint on the insured’s right to assign benefits because the insurer had no interest in the assignment. Id. Thus, the insurer-consent requirement was “superfluous.” Id. In contrast, says the Fourth District, requiring the consent of other insureds and named mortgagees is not superfluous because they have a “a vested interest that a reputable, legitimate third-party contractor perform repairs on the home.” Id. The Fourth District recognized that freedom of contract may be limited where it would impose “great prejudice to the dominant public interest,” but declined to find any such prejudice because “[t]he contract here does not prohibit assignment—it imposes a condition, requiring the approval of all insureds and the mortgagee.” Id. at 4.

In sum, the Fourth and Fifth Circuit’s disagreement stems from differing opinions about the scope of the Teutonia Fire rule. Noting this conflict, the Fourth Circuit “certify[ied] conflict” for purposes of appeal to the Florida Supreme Court. Id.

The Issue Has Been Appealed to the Florida Supreme Court

Interestingly, the Fourth District’s opinion was appealed by the underlying winner—Ark Royal Insurance Company. In mid-October 2018, the loser, Restoration 1 agreed with Ark Royal that the Florida Supreme Court should take up the case to provide unity in Florida on the issue. The Florida Supreme Court has not yet determined whether to take up the appeal, although the circumstances suggest that it is likely to do so. Indeed, a former Associate Justice—Ken Bell—recently authored an article indicating that the Florida Supreme Court should and will take up the appeal and side with the Fourth District. Ken Bell, AOB Issue Finally Headed to Florida’s Supreme Court, Insurance Business America (Oct. 11, 2018).

Importantly, the seven-member Florida Supreme Court is about to change significantly. Justices Barbara Pariente, Fred Lewis and Peggy Quince will be leaving the court in January 2019, having reached the applicable state judicial age limit. Lloyd Dunkelberger, Florida Supreme Court direction hinges on governor’s race, Orlando Weekly (October 23, 2018). These justices are considered to be policy-holder friendly. Newly-appointed Republican Governor Rick Scott, who will take office in January 2019, has the power to make new appointments. Id. The AOB appeal, which was filed in late September 2018, will likely be decided after this seismic judicial shift takes place. These changes are likely to work in favor of insurers with regard to the AOB appeal.


Until the Florida Supreme Court resolves the present AOB debacle, the law is likely to be treated in a piecemeal fashion across the state, depending upon where suit is filed. Cases filed in the Fifth District are subject to binding Fifth District precedent, and insurer/mortgagee-consent requirements will likely be found invalid. Insurers in these jurisdictions cannot rely upon insurer/mortgagee-consent failures to function as a proper basis for denial and to shield them from liability. The relevant counties in which this is the case are as follows: Citrus, Hernando, Lake, Marion, Sumter, Flagler, Putnam, St. Johns, Volusia, Orange, Osceola, Brevard and Seminole.

The opposite is true in the Fourth District. Insurers can rely upon insurer/mortgagee-consent failures to function as a proper basis for denial of a claim by the assignee, as well as to shield them from liability that would otherwise flow from such a denial. The counties in which this is the case are as follows: Palm Beach, Broward, Indian River, Martin, Okeechobee and St. Lucie. In this regard, the Fourth District’s approach is arguably more important than the Fifth District’s approach, as the majority of AOB abuse is concentrated in Southern Florida.

Insurer’s should tread carefully in the Second District, including the following counties: Pasco, Pinellas, Hardee, Highlands, Polk, DeSoto, Manatee, Sarasota, Hillsborough, Charlotte, Collier, Glades, Hendry and Lee. Although one Second District opinion enforced an insurer/mortgagee-consent requirement, it did so without comment. Because it did not reason out its judgment, it is very difficult to gauge the Second District’s commitment to the position it has so far taken. Nevertheless, applicable case law favors the validity of insurer/mortgagee-consent requirements in Second District counties.

Contractors Versus the Insurance industry—AOB’s Are Under Attack

Chip Merlin | Property Insurance Coverage Law Blog | December 3, 2018

The National Association of Public Insurance Adjusters held its mid-year meeting last week and the topic of assignment of benefits, commonly referred to as AOB’s, was on the agenda. Lisa Miller, an insurance lobbyist and regulator I have come across for over twenty-five years was the speaker on the topic.

Miller is a very bright and an excellent communicator. When Lisa Miller speaks about what the insurance industry has on its legislative agenda, I listen carefully. I would suggest Florida roofers and contractors do so as well. Here is a little about her background:

As a former deputy insurance commissioner, Lisa represents and advises property insurance companies representing 25% of Florida’s six million personal and commercial residential policies. She served as lead advisor to Florida’s Property and Casualty Insurance Fraud Task Force and serves as regulatory consultant to investors who are entering Florida’s insurance market. Lisa is the exclusive insurance lobbyist and technical consultant for the Florida Realtors association with 140,000 members in all Florida counties.

She made several points about AOB’s which my notes reflect as follows:

  1. AOB’s were not historically required for restoration contractors to get paid by insurance companies. They are a recent phenomenon being promoted by a small group of law firms to the restoration insurance industry.
  2. AOB’s have led to a significant increase in first party property insurance lawsuits. She showed me statistics after her speech which indicated at least a quarter of all first party property insurance lawsuits are being brought by restoration contractors and roofers.
  3. Premiums are rising as insurance companies face many needless lawsuits. She claims she has many examples of lawsuits being “leveraged” by the restoration contractors and their lawyers to pay amounts greater than what is legitimately owed. She has examples of some law firms who do shoddy legal work or who represent contractors with repetitive shoddy construction practices.
  4. AOB’s allow some contractors to rip off policyholders duped into the belief they will get quick quality work done and a quick claims handling by the contractor. Instead, those policyholders find they get no or little work done and are outside parties to a lawsuit owned by the contractor and their lawyers. I expect that she will have a number of policyholders testify about this occurrence at upcoming hearings in the Florida legislature.
  5. The Florida Attorney’s Fees statute protecting policyholders was never intended to protect parties not part of the insurance contract.

Here is what she says, in part, on the topic in her blog:

The hustle is real and it’s happening every day in Florida.

Under an Assignment of Benefits (AOB) contract, unsuspecting homeowners are being duped into signing away all their insurance policy rights to a third-party repair or renovation contractor. When the contractor submits their often inflated claim to the insurance company and the insurer refuses to pay it – the contractor sues, aided by lawyers able to game Florida’s one-way attorney fees and bad faith laws to collect all their attorney fees.

It’s a vicious and costly game, where insurance companies settle frivolous lawsuits only because it’s cheaper than going to trial. AOB abuse has created an additional $1 billion of inflated insurance claims over recent years – costs eventually passed along to all homeowners through higher rates. And the problem is getting worse.

Last year, I went to Tallahassee to speak with legislators about this issue and even ended up testifying about this and other issues. In Tallahassee, I also met with several longstanding and reputable restoration contractors about all the hassles they now have with insurance companies which did not exist fifteen years ago. I agree. The insurance industry property claims departments have changed a lot since I started working in this field in 1981. Computers and big data drive claims processes with many claims processes all geared towards one goal—pay less on claims. There is a war going on in the field between restoration contractors and the property insurance claims industry. We see it every day and for every alleged “bad” example by restoration contractors, I and other Merlin Law Group attorneys are told horrendous stories by former insurance adjusters of how they are forced to underpay claims.

Our firm does represent contractors. We are not one of those mill law firms that teaches gamesmanship to contractors about how to leverage AOB’s so that insurers are in a no-win situation. A number of my attorney colleagues that do so are also horrible litigators and have had numerous significant sanctions against them. Those instances will be used by Lisa Miller and the insurance industry in their fight against AOB’s.

A number of public adjusting firms actually represent restoration contractors. Yet, other public adjusters are furious with the restoration industry and have provided me factual instances of those contractors working with those same shoddy attorneys as runners. Whether the newly elected Florida Attorney General Ashley Moody or local state prosecutors will do something about these actions wait to be seen. To the extent they are prosecuted or indicted, I can guarantee those instances will also be shown by Lisa Miller and the insurance lobby as a need for AOB reform.

How all this will play out is anybody’s guess. But, the sweeping Republican victory does not bode well for the restoration construction industry and the future of AOBs in Florida. The insurance industry is in bed with Florida Republican leaders who have stated that AOB reform is a priority for them.

I hope those republicans and other leaders remember how important it is to support reputable contractors to get paid to do a first-rate job. Cheap, illegal and improper construction is easy to do and hide—at least for a while. I made the following comment last week and believe those making public policy should reflect on it and allow good contractors a means to enforce their ability to make a living against an insurance industry hell bent on reducing claims payments anyway they can:

Contractors are a core group that help restore our communities after catastrophes. Those contractors that come from far away communities and do quality work just as they do in their own communities are very important because there is no way local contractors can do all the work demanded following a large scale catastrophe. Professional restoration contractors that build with quality methods, materials, and pursuant to all local building codes are not the enemy and should be congratulated for their entrepreneurialism and willingness to work a long way from friends and families.

I really do not like going to Tallahassee in the winter and watch legislation being made. It is like watching sausage being made, at best. But, it looks like Tallahassee will be an inevitable place for me, again. I would suggest those good and reputable Florida restoration contractors and roofers prepare for a fight because you have one on your hands.

Thought For The Day

The American legislative process isn’t well suited to large and complex measures.
—George J. Mitchell

Are You Being Scammed? — Assignment of Benefits in Property Losses

John Hopkins | Searcy Denney Scarola Barnhart & Shipley | October 12, 201

According to the Coalition Against Insurance Fraud, about $80 billion is stolen every year by unscrupulous companies supposedly acting in the best interests of U.S consumers during critical moments. Hurricane Michael passing across the Florida Panhandle is one of those critical moments.

A type of fraud that seems to be gaining momentum is the “Assignment of Benefits” (AOB). Assignment of Benefits refers to a situation in which a policyholder signs a legal form that allows a plumber, a roofer or a water-removal operation, for example, to deal directly with the policyholder’s insurance company. Sounds convenient and it seems to make sense; let the professionals deal with each other. Right?

More often than not, it is a scam.

“Maybe you’ve just made an emergency call to a water extraction firm after discovering a flood in your kitchen,” a supporting document by the Consumer Protection Coalition reads. “Or a salesperson knocks on your door and asks to inspect your roof, saying you likely have damage due to recent storms. Or a stranger in a repair truck pulls up alongside you in a shopping center parking lot, saying they noticed your car windshield is cracked and it can be replaced on the spot – for free. Scenarios like these play out across Florida every day, and the story is hauntingly familiar. The repair person pulls out a document and says they can fix everything, but first you need to sign here. They promise to work directly with your insurance company, and say you won’t have to worry about a thing. At that moment, alarm bells should go off in your head. If you sign, you could become the latest victim of “Assignment of Benefits” fraud and abuse. And it may prove very costly to you and your family.”

By signing an Assignment of Benefits form, a policyholder gives the third-party vendor outright power to control the claim. The vendor then can falsify the claim and make it larger and more costly in scope. That can leave the policyholder on the hook if the insurance company balks and does not pay the full amount that was fraudulently submitted. Worse, in some cases the vendor can sue the policyholder’s insurance company without the policyholder’s consent.

The bottom line – you lose control over the claim and the repair process involving your own property.

“An explosion of claims and lawsuits involving AOBs is driving up the cost of home and auto insurance across Florida and directly impacting the price you pay,” the Consumer Protection Coalition document reads. “AOB fraud and abuse is real, is growing rapidly – and is already taking money out of your pocket!”

How rampant is the ruse? The Florida Office of Insurance Regulation reports that in 2016, the latest year for which statistics are available, there were 28,000 cases confirmed compared to 400 cases in 2006.

“AOBs have been a part of Florida’s marketplace for more than 100 years,” according to the office. “Loopholes in the way it is being used in the marketplace are driving up costs for homeowners across the state due to unnecessary litigation associated with certain AOB claims. You may be party in a lawsuit against the insurance company if the third party and company are in dispute on the payment amount of the claim. You may be responsible for payment of additional costs if the insurance company does not pay the third party the full amount requested and a lien may be placed on your home if you fail to pay.”

Sadly, more victims of Assignment of Benefits forms are sure to result in the aftermath of the catastrophic storm. Residents whose homes suffered damages or who lost their homes altogether should not be taken advantage of, but that probably will occur one too many times.

“You are most likely to be offered an AOB when requesting emergency repairs or when companies go door-to-door soliciting business,” Citizens Property Insurance Corporation warns. “After a covered loss, your policy requires that you take reasonable emergency measures to protect your property from further damage. Emergency measures include only what is reasonable and necessary to secure your home and prevent further damage.”

Here are steps to avoid getting caught in the trap.

  • Policyholders should be the first and only ones to contact their insurance companies when filing a claim.
  • Even though a third-party vendor might say otherwise, policyholders do not have to sign an Assignment of Benefits form no matter how bad the damage.
  • It is a best practice to photograph and / or take videos of damaged property for evidence and to not allow a vendor to start repairs until after an insurance adjustor has inspected the home as that could place coverage in jeopardy.
  • The insured always should maintain control of the policies they purchased and paid for and continue to invest in for peace of mind. Criminals can take away that peace of mind with a single signature.

And, if all this is not enough, your policy of insurance contains various requirements you are to follow and with which you must comply. Failing to comply with those requirements can affect coverage under the policy. The person to whom you gave over control through an AOB only cares about getting paid and may negate your coverage by failing to comply with those policy requirements.

Florida Court of Appeals Creates Hurdles to Assignment of Benefits

Margo Meta | The Policyholder Report | October 5, 2018

Last month, the Florida Court of Appeals for the Fourth District weakened assignment-of-benefits claims after it held that an insurer may require all insureds and mortgagees to provide written consent prior to executing an assignment of benefits agreement.

In Restoration 1 of Port St. Lucie v. Ark Royal Ins. Co., Liza and John Squitieri’s home suffered water damage. The Squitieris were insured under a homeowners’ insurance policy issued by Ark Royal Insurance Company. Ms. Squitieri entered into a contract with Restoration 1, including an assignment-of-benefits agreement, in order to receive emergency cleanup services. She did not obtain written consent from her husband or from her mortgage company.

The Ark Royal policy, however, contained a provision forbidding insureds from assigning benefits under the policy:

No assignment of claim benefits, regardless of whether made before a loss or after a loss, shall be valid without the written consent of all ‘insureds,’ all additional insureds, and all mortgagee(s) named in this policy.

Ark Royal denied Restoration’s claim for benefits on the basis of this anti-assignment provision. The trial court granted Ark Royal’s motion to dismiss, finding that the assignment-of-benefit agreement did not comply with the unambiguous anti-assignment provision, which required the written consent of Mr. Squitieri and the mortgage company.

Assignment of benefits in Florida

Assignment-of-benefits agreements are common for companies that offer emergency-restoration services, as they allow homeowners to obtain immediate repairs without paying the restoration company directly. Upon completion of the work, the restoration company seeks reimbursement from the homeowners’ insurer.

The Ark Royal court upheld the trial court’s decision, holding that that the anti-assignment provision unambiguously required that every insured and mortgagee provide written consent prior to the execution of the assignment-of-benefits agreement. The Ark Royal opinion contradicts One Call Property Services, Inc. v. Security First Ins. Co., another recent opinion by the Court of Appeals for the Fourth District. In One Call, a homeowner entered into a contract for emergency water-removal services, which included an assignment-of-benefits agreement. The One Call court held that the anti-assignment provision was invalid under Florida law, which clearly prohibits the restriction of a homeowner’s right to assign claims after a loss.

The Ark Royal decision also directly contradicts the recent decision by the Court of Appeals for the Fifth District in Security First Ins. Co. v. Florida Office of Insurance Regulation. In Security First, Florida’s Office of Insurance Regulation disapproved the insurer’s request to amend its policy language to include an anti-assignment provision, which is nearly identical to the provision in the Ark Royal Policy. The Security First court agreed with the regulator’s decision, holding that the anti-assignment provision contradicted well established law, as originally laid out in the 1917 case of West Florida Grocery Co. v. Teutonia Fire Ins. Co. In West Florida Grocery, the Florida Supreme Court held that an anti-assignment provision requiring an insurer’s consent for assignment of benefits after a loss was unenforceable. The Ark Royal court considered the arguments addressed in the Security First case, but it determined that the court had misquoted and, thus, inflated the holding of West Florida Grocery, which applied to anti-assignment provisions requiring an insurer’s consent, not provisions requiring the consent of all insureds and mortgagees. The Ark Royal court concluded that the Florida Legislature, not the court, should ultimately make a public-policy determination regarding whether anti-assignment provision may require the consent of all insureds and mortgagees.

What does this mean for policyholders?

The Ark Royal court’s decision is a loss for policyholders and emergency-restoration companies in counties within the Fourth District, which includes Broward, Indian River, Martin, Okeechobee, Palm Beach, and St. Lucie. In these counties, policyholders will be forced to pay out-of-pocket for emergency repairs when mortgage companies inevitably refuse to provide consent. Emergency-restoration companies will also be harmed because many homeowners will be unable to pay the substantial cost of service up-front.

Policyholders and emergency-restoration companies in counties in the Fifth District, which includes Brevard, Citrus, Flagler, Hernando, Lake, Marion, Orange, Osceola, Putnam, Seminole, St. Johns, Sumter and Volusia, as well as those in other Districts, are less likely to face the same challenges because there is controlling case law supporting the position that these anti-assignment provisions are invalid. Until the Florida Supreme Court rules on the issue, there will be continued uncertainty as to the validity of anti-assignment provisions.

Appellate Court Disagrees with Sister Court on Assignment of Benefits

Erin Dunnavant | Property Insurance Coverage Law Blog | September 9, 2018

In December of last year, my colleague Ashley Harris discussed Security First Insurance Co. v. Florida Office of Insurance Regulation,1 where the Florida Fifth District Court of Appeal (Fifth DCA) upheld the Office of Insurance Regulation (“OIR”) prohibition of proposed language in an insurance policy that would require “all insureds, all additional insureds and all mortgagees” named on a policy to consent to any post-loss assignment of benefits (“AOBs”) to a third party.

In upholding the prohibition on such language, the Fifth DCA cited to a decision from the Fourth DCA, One Call Property Services. Inc. v. Security First Insurance Company,2 that discussed the competing public policy concerns regarding AOBs:

Turning to the practical implications of this case [which involved an assignment of a claim in the face of a provision barring the assignment of a policy], we note that this issue boils down to two competing policy considerations. One the one side, the insurance industry argues that assignments of benefits allow contractors to unilaterally set the value of a claim and demand payment for fraudulent or inflated invoices. On the other side, contractors argue that assignments of benefits allow homeowners to hire contractors for emergency repairs immediately after a loss, particularly in situations where the homeowners cannot afford to pay the contractors up front.

For more on the One Call case, see our blog post, “Assignment of Benefits,” from July 1, 2015.

Ultimately, the Fifth DCA deferred such public policy arguments to the legislature,3 but upheld the Hearing Officer’s Order (adopted by the OIR Commissioner) that upheld the OIR’s decision to disapprove of the provision finding he had correctly interpreted the law on the subject. For instance, the Hearing Officer explained that “a restriction on the right of a policyholder to freely assign his or her post-loss benefits is prohibited under Florida law” and “the incorporation of such a restriction [requiring all insureds and mortgagees to consent] on an assignment of post loss rights in an insurance policy would be misleading for policyholders.” [which would contravene Fla. Stat. 627.411 (e)].

However, just this past week in Restoration 1 of Port St. Lucie a/a/o John and Liza Squitieri v. Ark Royal Insurance Company, Case No. 4D17-1113 (Fla. 4th DCA Sept. 5, 2018), the Fourth DCA changed lanes on this issue and affirmed dismissal of an assignee’s case where there was an identical assignment provision involved, “no assignment of claim benefits, regardless of whether made before a loss or after a loss, shall be valid without the written consent of all insureds, all additional insureds and all mortgagee(s) named in this policy.”

The underlying facts in this case were that policyholders John and Liza Squitieri (the insureds) took out a policy with Ark Royal. The policy contained the above-referenced assignment provision. The insureds suffered a water loss and had Restoration 1 of Port St. Lucie to perform clean-up services. Ms. Squiteiri signed an assignment of benefits to Restoration 1, but neither the mortgagee or her husband ever executed the assignment.

Ark Royal would not pay the full $20,305.74 that Restoration 1 claimed was due and owing for the work, which ultimately resulted in Restoration 1 suing Ark Royal for the remaining damages in a Count for Breach of Contract, and in a Count for Declaratory Judgment alleging that the provision in the policy limiting the AOB was illegal. Ark Royal then moved to dismiss the complaint alleging that the assignment was invalid under Ark Royal’s insurance contract with its insureds. Although Restoration 1 filed a response and a cross-motion for summary judgment, the trial court dismissed the case and Restoration 1 appealed the dismissal.

In affirming the dismissal, the Fourth DCA disagreed with the Fifth District’s opinion in Security First, finding that its reliance on West Florida Grocery, v. Teutonia Fire Insurance Company, 77 So.209 (Fla. 1917) is overbroad, and that really, West Florida Grocery only stands for the proposition there need not be “insurer consent” when there is a post loss AOB.4

In disagreeing with its sister Court, the Fourth DCA ultimately held:

“We affirm the trial court’s dismissal of the complaint and declaratory judgment action and hold that the language of the assignment of benefits provision in the instant insurance contract is enforceable. The central reasoning and holding of West Florida Grocery does not extend to the facts of this case. To the extent that the Fifth District in Security First has expanded upon West Florida Grocery, we certify conflict. Finally, with respect to the public policy concerns of both parties, they are best addressed by the legislature, not the Courts.”

This is a relatively narrow ruling that does not invalidate assignments. If upheld however, it may limit insureds’ assignment rights, particularly regarding having to obtain a mortgagee’s signature.

Let’s use Mrs. Squitieri as an example of the foreseeable issues associated with needing to obtain the mortgagee’s signature on an assignment:

Mrs. Squitieri has water intrusion at her home. She, not the mortgagee, has her “boots on the ground” dealing with the loss first-hand. She must act quickly so the water intrusion does not get worse, cause mold issues, and do even more serious damage to her home. She calls Restoration 1, but does not have an extra $20,000.00+ sitting on her dining room table to pay Restoration 1 right when they come out and perform their dry-out services. She is also not sure what the insurance company will cover at this point. As such, Mrs. Squitieri enters into an AOB with Restoration 1 as a practical solution. This way, Restoration 1 can go back and get reimbursed from Ark Royal, the Squitieris’ home is dried out and they have mitigated their damages (preventing them from getting worse) as required under their policy. Now imagine adding the step of obtaining the mortgagee’s signature into the mix? At minimum, the insureds will generally be required to submit several pieces of paperwork regarding the claim, such as the claim determination letter and the claim adjuster’s summary. In a scenario like the Squitieris, the mortgage company will also want to review Restoration 1’s estimate and/or bid and then may have to go up the chain to approve it. Then they would have to figure out who actually has the authority to sign it on behalf of the mortgagee. The point is, it’s hardly ever a process that can be performed overnight, and when emergency repairs are needed, that’s a serious concern for insureds and their families.

In addition to Florida case law in favor of AOBs, perhaps many of these practical considerations were behind the OIR and the Fifth DCA’s decision to bar such language from Security First’s policies.

We will keep you posted on the status of this case as it is not final until the time for rehearing has expired. If that happens, we may then see the issue come before the Florida Supreme Court due to what will then be conflicting opinions from the Fourth and Fifth DCAs on this issue.
1 Security First Ins. Co. v. Florida Office of Ins. Regulation, 232 So.3d 1157 (Fla. 5th DCA 2017).
2 One Call Property Services v. Security First Ins. Co., 165 So.3d 749, 753 (Fla. 4th DCA 2015).
3 Although there was legislation proposed on the AOB issue in 2017 and 2018 (Senate Bill 62), it apparently died while before the banking and insurance committee.
4 The Fourth DCA also makes a distinction between the West Florida Grocery case –where the point was made that once the AOB is post loss, “insurer consent” becomes “superfluous” as the insurer will still have to cover the loss at that point, while in this case, mortgagees and other insureds do have a vested interest in what happens to the property post loss. On the other hand, there is also an indication the West Florida Grocery court believed that partial payment by the insurance company gave “tacit consent” to the assignment. Could this mean that if an insurer makes a partial payment even in the face of an otherwise invalid assignment there could be a waiver argument? In addition, in West Florida Grocery, the assignment containing “insurer consent” was a standard blank form attached to the policy that the assignor had filled out, rather than a separate AOB document or a provision in the policy itself.