Florida’s “Assignment of Benefits” Bill: A Guide Through the New Statutory Framework

John David Dickenson and Chad A. Pasterneck | Property Insurance Law Observer | April 26, 2019

This week, after 7 years of failed efforts, the Florida Legislature passed a meaningful Assignment of Benefits (“AOB”) reform bill.  Florida Governor Ron DeSantis announced yesterday that he would sign the legislation designed to cut back on abusive AOBs, a practice that has plagued the hurricane-prone state. In recent years, many contractors have taken advantage of Florida’s unique one-way attorney’s fee shifting statute for insurance coverage litigation. This rule has incentivized contractors to, via the assignment of benefits mechanism, charge property owners outlandish amounts and to then pursue needless, sometimes frivolous, and always expensive litigation against insurance companies.

Florida H.B. 7065, expected to take effect July 1, 2019, makes several key statutory changes designed to curb AOB practices. We discuss a few of those highlights here.

The bill establishes several new sections of the Florida Statutes, including Fla. Stat. § 627.7152. § 627.7152(2)(a) sets requirements for a proper assignment of benefits:

627.7152 Assignment agreements.—

(2)(a) An assignment agreement must:

1) Be in writing and executed by and between the assignor and the assignee.

2) Contain a provision that allows the assignor to rescind the assignment agreement without a penalty or fee by submitting a written notice of rescission signed by the assignor to the assignee within 14 days after the execution of the agreement, at least 30 days after the date work on the property is scheduled to commence if the assignee has not substantially performed, or at least 30 days after the execution of the agreement if the agreement does not contain a commencement date and the assignee has not begun substantial work on the property.

3) Contain a provision requiring the assignee to provide a copy of the executed assignment agreement to the insurer within 3 business days after the date on which the assignment agreement is executed or the date on which work begins, whichever is earlier. . . .

4) Contain a written, itemized, per-unit cost estimate of the services to be performed by the assignee. . . .

Under § 627.7152(2)(a), contractors will no longer be able to blindside their customers and insurers with exorbitant bills with the expectation that an insurance company will eventually pay it. Now, contractors will be required to provide detailed estimates in advance of performing the work in order to effectively obtain an assignment of insurance benefits. Further, the assignee must promptly notify the insurer of the assignment. Insurers will now be able to monitor costs as they are incurred and ensure contractors are not performing unnecessary repairs.

In the event of litigation, § 627.7152(3) addresses the burden of the assignee:

(3) In a claim arising under an assignment agreement, an assignee has the burden to demonstrate that the insurer is not prejudiced by the assignee’s failure to:

(a) Maintain records of all services provided under the assignment agreement.

(b) Cooperate with the insurer in the claim investigation.

(c) Provide the insurer with requested records and documents related to the services provided, and permit the insurer to make copies of such records and documents.

(d) Deliver a copy of the executed assignment agreement to the insurer within 3 business days after executing the assignment agreement or work has begun, whichever is earlier.

Like a policyholder, assignees must cooperate with the insurer. If an assignee fails to maintain records, provide the insurer requested documents, or deliver the agreement as required by § 627.7152(2)(a), the assignee will bear the burden in litigation of demonstrating a lack of prejudice to the insurer.

In order to even get into a courtroom, however, § 627.7152(9)(a) requires assignees to serve written notice at least 10 business days prior to filing suit. The notice must include, among other things, the amount of damages in dispute, the amount claimed, and a pre-suit settlement demand. The assignee must also provide a detailed written invoice or estimate of services, the number of labor hours, and in the case of work performed, proof that the work has been performed in accordance with “accepted industry standards.” Upon receipt of the notice,

(b) An insurer must respond in writing to the notice within 10 business days after receiving the notice specified in paragraph (a) by making a presuit settlement offer or requiring the assignee to participate in appraisal or other method of alternative dispute resolution under the policy. An insurer must have a procedure for the prompt investigation, review, and evaluation of the dispute stated in the notice and must investigate each claim contained in the notice in accordance with the Florida Insurance Code.

Insurers have an opportunity to avoid litigation through negotiation or appraisal. Assignees are encouraged to make reasonable settlement demands and to consider reasonable offers because failure to do so can trigger an award of attorney’s fees in the insurer’s favor:

(10) Notwithstanding any other provision of law, in a suit related to an assignment agreement for post-loss claims arising under a residential or commercial property insurance policy, attorney fees and costs may be recovered by an assignee only under s. 57.105 and this subsection.

 (a) If the difference between the judgment obtained by the assignee and the presuit settlement offer is:

1) Less than 25 percent of the disputed amount, the insurer is entitled to an award of reasonable attorney fees.

2) At least 25 percent but less than 50 percent of the disputed amount, no party is entitled to an award of attorney fees.

3) At least 50 percent of the disputed amount, the assignee is entitled to an award of reasonable attorney fees.

Fla. Stat. § 627.428 is the one way attorney’s fee shifting statute in Florida’s insurance code.  This statute generously provides fee-shifting to “prevailing” policyholders and claimants, including following negotiated settlements in contravention of the general American rule. Under the new AOB statute, § 627.7152(10), awards of attorney’s fees are discretionary in suits against insurers by assignees.  Further, § 627.7152(10) requires assignees to obtain a judgment of an amount at least 50% greater than the insurer’s pre-suit settlement offer in order to obtain an award of attorney’s fees. For additional encouragement to accept reasonable settlement offers, assignees who fail to obtain a judgment at least 25% greater may be required to pay the insurer’s attorney’s fees.

Last, insurers can avoid “assignment of benefits” issues altogether by prohibiting AOBs in their policies. The bill creates a new § 627.7153, which allows “[a]n insurer may make available a policy that restricts in whole or in part an insured’s right to execute an assignment agreement” if certain conditions are met.  Those conditions include that the insurer must also provide unrestricted coverage, the restricted policy is available at a lower cost than the unrestricted policy, policies prohibiting assignment in whole cost less than policies prohibiting assignment in part, and restricted policies must contain notice on its face.

With the passage of this new law, Florida will see a new litigation landscape in the area of assignment of benefits. The law is prospective only, so it will not technically impact existing AOB litigation.  However, through passage of this law, Florida has disincentivized unscrupulous contractors and leveled the courtroom playing field and the presently rampant AOB litigation should begin to fade. Ultimately, these changes are expected to benefit Florida policyholders with reduced insurance premiums.

Recent Property Insurance Assignment of Benefits Legislation

Conroy Simberg | April 29, 2019

After 6 years, the Florida Legislature has finally passed what appears to be an effective crackdown on Assignment of Benefit (AOB) abuse that has plagued first-party property insurance for years. 

The Act creates Florida Statute 627.7152, which preliminarily defines “Assignment Agreements” as instruments by which post-loss benefits under a property insurance policy are assigned or transferred from insureds to persons providing protection, repair, restoration, or replacement services relating to damaged property.  The statute specifies that an assignment must:

  1. Be in writing and executed by both the assignor and assignee;
  2. Contain a provision permitting the assignor property owner to rescind the agreement without penalty by written notice of rescission: (1) within 14 days after execution of the agreement; (2) at least 30 days after the date work on the property is scheduled to begin if the work has not been “substantially performed;” or (3) if the assignee has not begun the work, and the assignment specifies no start date, then at least 30 days after execution of the agreement;
  3. Contain a provision requiring the assignee to provide its carrier with a copy of the executed assignment within 3 business days after its execution or the date the work begins, whichever date is earlier;
  4. Contain a written, itemized, per-unit cost estimate of the services the assignee expects to perform;
  5. Relate only to services to protect, repair, restore or replace a structure, or to mitigate against further damage;
  6. Contain a notice in 18-point typeface that, by executing the assignment, the property owner gives up certain rights to insurance proceeds to the assignee, and further notifying the owner of its right to rescind the agreement without penalty pursuant to the statute. The notice must also advise the owner that he or she remains responsible for compliance with the duties set forth in the insurance policy; and
  7. Contain a provision requiring the assignee contractor to indemnify and hold harmless the assignor property owner from all liability, including damages and attorney’s fees, if the policy prohibits, in whole or in part, the assignment of benefits.

The statute further provides that the assignment may contain neither any penalty or fee for rescission nor any other processing or administrative fee. 

The statute also contains a provision regarding emergency services necessary to protect property from further damage, limiting the assignment to $3,000 or 1% of Coverage A under a property insurance policy.  In order to fall within this limited exception to the statute’s notice and rescission provisions, the assignee must establish that there was “a situation in which a loss to property, if not addressed immediately, will result in additional damage until measures are completed to prevent such damage.” 

If an assignee breaches its statutory duties, it bears the burden to prove that the insurer was not prejudiced by the breach.  These duties include: (1) the maintenance of records of all services provided; (2) cooperation with the insurer’s claim investigation; (3) provision to the insurer of requested records and documents related to the assignee’s services, including permitting the carrier to make copies of any such documents or records; and (4) the delivery of a copy of the executed assignment to the insurer within 3 business days after execution of the agreement. 

The statute also provides that the assignee: 

  1. Must provide the assignor with accurate and revised estimates if the scope of changes; 
  2. Must perform the work in accordance with “accepted industry standards;”
  3. May not seek payment from the assignor of any amount in excess of his or her deductible unless the assignor has chosen to have additional work performed at the assignor’s sole expense;
  4. Must, as a condition precedent to suit, and, if required by the insurer, submit to examinations under oath and provide recorded statements conducted by the carrier or its representative that are reasonably necessary based on the nature and scope of the work, provided that the examination and/or statement is limited to matters relating to the services, the cost of the services, and the assignment agreement;
  5. Must also, as a condition precedent to suit on the policy, and if required by the insurer, participate in appraisal or other alternative dispute procedures pursuant to the terms of the policy.

The statute will not modify or eliminate any managed repair arrangement contained in an insurance policy. 

The statute further provides that acceptance of an assignment by an assignee waives the assignee’s (or its subcontractors’) claims against a named insured for payments arising from the assignment.  These claimants also may not: (1) attempt to collect money from an insured; (2) sue an insured; (3) lien an insured’s property; or (4) report an insured to a credit agency for the failure to make payments arising from the assignment, unless the assignment has been rescinded or the agreement is deemed invalid.  The assignee further agrees to indemnify and hold harmless the assignor from all liability, including damages and attorneys’ fees, if the insured’s policy prohibits the assignment of benefits. 

In addition, the assignee must provide the named insured, insurer, and the assignor (if someone other than the named insured) with a notice of intent to initiate litigation before filing suit under the policy.  The notice must: (1) specify the damages in dispute; (2) state the amount claimed; (3) include a pre-suit settlement demand; (4) include itemized information on equipment, materials, supplies, and the number of labor hours expended, and; (5) provide proof that the work has been performed in accordance with accepted industry standards.  The carrier must respond in writing to the notice within 10 business days after receipt by either making a pre-suit settlement offer or requiring the assignee to participate in appraisal or other alternative dispute resolution procedures. 

The assignee is entitled to recover its attorney’s fees and costs under Florida Statute 57.105 and this new statute only under certain limited circumstances, and it may be required to pay the insurer’s attorneys’ fees.  Specifically, if the judgment obtained after suit is less than 25% of the disputed amount, the insurer is entitled to its reasonable attorneys’ fees.  If the judgment is at least 25% but less than 50% of the disputed amount, neither party may recover its fees and costs.  Finally, if the judgment is at least 50% of the disputed amount, the assignee is entitled to its reasonable attorneys’ fees and costs. 

If the insurer fails to inspect the property or provide authorization for the repairs within 7 calendar days after the first notice of loss, it may waive its entitlement to attorneys’ fees if suit is later filed.  The insurer does not waive this entitlement if its failure to comply results from: (1) a state of emergency; (2) factors beyond the insurer’s control that prevented an inspection or authorization for repairs; or (3) the named insured’s failure to permit an inspection of the property after the insurer has requested permission.  In that event, the insurer does not waive its right to pursue reasonable attorneys’ fees and costs if it prevails in a suit brought by the assignee. 

If an assignee has previously sued the carrier and voluntarily dismissed the action, but later refiles the same suit, the court may order the assignee to pay the insurer’s attorneys’ fees and costs resulting from the initial lawsuit.  The court must stay the proceedings in the later-filed lawsuit until the assignee has complied with the court’s order relating to fees and/or costs. 

The statute expressly does not apply to assignments granted to a subsequent purchaser of property who has an insurable interest in the property after a loss or a power of attorney that permits an insured’s representative to act on behalf of an insured with respect to the insured’s property insurance.  The statute also does not apply to liability coverage under a property insurance policy. 

Assuming that the bill is signed by the Governor, it will become effective as to any assignment of benefits executed on or after July 1, 2019.  Significantly, the statute also provides that, by January 30, 2022, property insurers must report data on each residential or commercial property claim paid or litigated under an assignment.  The specific types of data required to be reported will be determined by the Financial Services Commission. The Commission will presumably analyze whether the statute furthered the desired goal of reducing loss and loss-adjustment expenses, which was the impetus for the legislation. 

House Bill 7065 also enacts Section 627.7153, which permits an insurer to offer a policy that restricts, in whole or in part, an insured’s right to execute an assignment of benefits if: 

  1. The insurer also offers insureds the same coverage under a different policy that permits assignments of benefits;
  2. The restricted policy is available at a lower cost than an unrestricted policy;
  3. The policy prohibiting all assignments is cheaper than a policy prohibiting partial assignments; and
  4. Each restricted policy provides notice to the insured in bold-faced type that the policy does not permit unrestricted assignments, and that by selecting that policy, the insured waives his or her right to freely assign or transfer to a third party the post-loss property insurance benefits available under to the policy. 

Carriers must notify their insureds, at least annually, of the various coverage options available under the statute, and that notice must be part of and attached to the premium notice.  A named insured must reject a fully assignable policy in writing or electronically on a form approved by the Office of Insurance Regulation, and must specifically state that the policy restricts the assignment of benefits in a heading in regulated type size. 

Section 627.7153 becomes effective on July 1, 2019, and it applies to policies issued or renewed after that date. 

Finally, Florida Statute 627.422, which is an existing statute currently providing that post-loss assignments may or may not be assignable depending on their terms, is amended to provide that any such assignment entitles the insurer to deal with the assignee as the owner or “pledgee” of the policy in accordance with the terms of the assignment until the insurer has received at its home office written notice of termination of the assignment or notice from some other person claiming an interest in the policy that conflicts with the assignment.  The statute further provides that a property insurance policy may not prohibit assignments of post-loss benefits unless the policy complies with Florida Statute 627.7153. 

In the event that any portion of the foregoing law is deemed invalid, the Legislature has provided that any invalidity should not affect the remaining provisions of the statute, which are severable from any deemed invalid as, for example, unconstitutional. 

The foregoing summary of the new AOB law is just that: a summary, and this is not meant to exhaustively detail the finer points of the proposed law.  We have attached hereto a copy of the law in its entirety for your edification.  

Assignment of Benefits Contracts are the Hot Topic of Discussion and Legislation in Florida, North Dakota and Elsewhere

Chip Merlin | Property Insurance Coverage Law Blog | February 11, 2019

Merlin Law Group knowledge manager Ruck DeMinico sent me recent North Dakota legislation pertaining to Assignment of Benefit contacts. This topic was also hotly debated two weeks ago at the Windstorm Insurance Conference in Orlando. Insurance restoration contractors, their lobbyists and attorneys are desperately trying to prevent any changes that would make such contracts more difficult to enter into or enforce. The insurance lobbyists and their public relation firms are doing everything they can to show contractors and their lawyers as evil and greedily taking advantage of the public trust.

The Florida politician primarily responsible for overseeing insurance is Jimmy Patronis. Here is a news article describing his view on the situation:

Technically we have a law on the books that is being legally exploited,” said Chief Financial Officer Jimmy Patronis.

The law the CFO is talking about is Assignment of Benefits. It allows homeowners to sign into an agreement with a third party, such as a water extraction company, or a plumber, and allows the third party to act as the homeowner and seek payment for their work directly from the insurance company.

Patronis believes this should be allowed to happen but says bad actors in the business are taking advantage of it. So much so that in 2006 he says the state had 400 lawsuits involving AOB, in 2018 he says there were 31 thousand.

“You are taking their claim from them and giving them the comfort that you’re going to solve all their problems.” Patronis continued saying, “when essentially now you’re at the mercy of who you’ve just given your claim benefit to. But the bad attorneys and contractors that exploit it we should bury them under the jail.”

Patronis says the easiest way to combat it is to just have the insurance companies do their job.

“I have challenged the insurance carriers through multiple conference calls and just demanding to them do your job, pay the claims, answer the phone calls, take care of the customer.” Patronis says, “If that is being done, if we are doing that then the consumer who is under duress is not looking for solutions that are outside the normal insurance process.”

The CFO says if insurance companies aren’t responding to their policyholders quickly enough, he understands why they are seeking outside help. But he had this message for the bad actors he calls scoundrels.

“What you’ve done is you’ve taken this law on the books and you’ve twisted it and you’re doing nothing but driving up rates and driving out insurance carriers out of the state of Florida,” said Patronis.

At least Patronis sees that the issues, in part, as a two-way street. Not all politicians do.

The National Association of Insurance Commissioners noted the rise of Assignment of Benefit contracts increasing litigation in Florida in a 2017 paper, Emerging Issues Within the Assignment of Benefits Clause:

Over the past decade, the extension of assigning benefits has become seriously magnified in the state of Florida with a plethora of claims involving homeowners assigning their right to recover costs associated with first-party emergency physical damage repairs. Jay Neal, Florida Association for Insurance Reform (FAIR) President and CEO, estimates that in the past decade, lawsuits filed by restoration contractors using an AOB provision have increased more than 1,000% (Neal, 2015). The past five years, however, represents the steepest increase in filed claims.

An article, A Few More Thoughts About Assignments of Benefits, written by Patrick Wraight, who is the director of the respected Academy of Insurance, stated the positive versus negative aspects of the Assignment of Benefit contracts:

The premise of the AOB

Let’s reset again and make sure that we’re all on the same page. An assignment of benefits is a document, or clause in a contract, that allows another party (a contractor, water mediation company, your doctor’s office) to file for, and receive insurance benefits. This process allows the insurance company to negotiate and pay the assignee for the claim, rather than the customer having to pay their contractor first and then file the claim.

In theory, it’s a great way to operate. Think about it. The customer takes one link out of the claim chain. Without the AOB, the process is centered on the customer who spends their time getting an estimate, sending it to the insurance company, negotiating with the adjuster about the most fair claim payment, receiving the payment, getting the contractor to start the work, paying the contractor, and then finalizing the claim (or reopening the claim if the repairs take more money that initially paid, which means starting over almost from the beginning).

The AOB makes it so that the insured can hire a contractor and then remove themselves from the process. All they have to do is drink their coffee, wait for the contractor to finish the work, and pay their deductible. OK, that might be an oversimplification, but you get the point. The insurance company works directly with the contractor to get the repairs going.

The problem with the AOB

As you know by now (because you’re daily Insurance Journal readers), it just doesn’t work that way. Not every insurance company pays the claims that they probably should as easily as they should (sorry insurance people, but it’s kind of true). Not every repair contractor files the correct amount for their claim. Sometimes they inflate the costs. What happens when the insurance company doesn’t want to pay for the costs as presented by the contractor? That’s right, the contractor calls their attorney and (you know it) the insurance company contacts their legal team. What happens with the customer?

The customer finds themselves in the middle of a feud, which might leave them waiting for the work to be done, or worse yet, they find that they are on the hook for the balance if the insurance company wins against the contractor. For the customer, the best case is that they get their repairs paid for and find out later that their insurance premiums go up (along with the rest of us, thanks) to make up for the extra expenses that the insurance company had.

I am not certain where all this is going to lead, but the issue is not just in Florida. Insurance lobbyists, state legislatures and Departments of Insurance have Assignment of Benefit contracts being used by insurance restoration contractors on their national radar.

Nothing ever stays the same. It is easy to predict that the law and use of Assignment of Benefit contracts will not be the same in many states five years from now.

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