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The Current State of Assignment of Benefits Litigation in Florida

assignment of benefits florida

By: Senior Counsel Nhan T. Lee with Associate Wayne A. Comstock

assignment of benefits florida

Homeowners typically experience property damage and use contractors to repair the damage as quickly as possible. [4] An assignment of benefits, or AOB, is an agreement “in which a contractor begins the work [on the property owner’s home] without charging the property owner and agrees to seek compensation from the insurer.” [5] An AOB can be beneficial to a homeowner because an AOB eliminates the processing of a claim through the insurance company. [6] Without contacting the insurance company, “the insured can hire a contractor, wait for the contractor to finish the work, then pay the deductible.” [7] Despite the time saving benefit to a homeowner, AOBs can lead to costly litigation and higher premiums. [8]

In Florida, AOB abuse first started with Personal Injury Protection (“PIP”) claims. [9] A PIP claim works similar to an AOB property damage claim. [10] In a PIP claim, “[t]he assignment lets a medical provider seek reimbursement for their services directly from an insurer. The injured person receives medical care and does not have to deal directly with their insurance company.” [11] PIP claims led to abuse because plaintiff’s attorneys filed many lawsuits on behalf of the assignee “for inflated claims or potentially unnecessary medical treatment.” [12]

Prior to 2019, AOBs frequently resulted in costly litigation primarily because Florida law provided for one-way attorney’s fee provisions. [13] In a first-party lawsuit, Florida law required insurers to pay plaintiff’s attorneys a court determined “reasonable sum.” [14] However, Florida law did not require plaintiffs to compensate the insurer’s attorneys. [15] This imbalance pressured insurers to settle claims “rather than face expensive litigation, which, if they lose, means they must pay the other side’s lawyers.” [16]

The public policy rationale supporting one-way attorney’s fee provisions in Florida stems from Feller v. Equitable Life Assurance Soc. [17] In Feller , the Supreme Court of Florida described the purpose of one-way attorney’s fee provisions as “to discourage the contesting of policies in Florida courts, and to reimburse plaintiffs reasonably their outlay for attorney’s fees when suing in Florida courts.” [18] In Ivey v. Allstate Ins. Co. , the Supreme Court of Florida further described the rationale behind one-way attorney’s fee provisions as “to level the playing field so that the economic power of insurance companies is not so overwhelming that injustice may be encouraged because people will not have the necessary means to seek redress in the courts.” [19] AOBs defeat the purpose of one-way attorney’s fee provisions because AOBs do not serve those individuals one-way attorney’s fee provisions are meant to protect: the policyholder and any beneficiaries the policyholder designates. [20]

The Florida legislature enacted PIP reforms in 2012 that curbed “AOB abuse in auto insurance.” [21] However, around the same time, AOB abuse began spreading to property damage claims. [22] Vendors targeted homeowners insurers because Florida is home to a large number of insured homes, “which ensures large claimant and plaintiff pools.” [23] In addition, hurricanes and tropical storms in Florida carry the risk of water damage. [24] In Florida, “[w]ater damage repairs often need to be undertaken immediately to prevent further damage.” [25] To complicate matters further, “the standard homeowners policy requires that policyholders protect their property from further damage by making reasonable and necessary repairs.” [26] A homeowners policy is more attractive than an auto insurance policy because the average loss is higher: $11,000 compared with $1,300. [27] The higher threshold means that a homeowner assignee in a property claim can potentially “inflate repair bills to a greater degree.” [28] As a result of increasing AOB litigation, insurers raised premiums. [29] For example, “the average premium [in Florida] rose 30 percent between 2007 and 2015.” [30] AOB abuse is most pronounced in Florida because “insurers’ legal costs are rising much faster than losses from homeowners claims” compared with other states. [31]

In an effort to curtail AOB abuse, the Florida legislature enacted significant reforms to AOBs and the one-way attorney’s fee provision. [32] The legislation, enacted on July 1, 2019, “require[d] assignment agreements to be in writing and signed by both the assignee and assignor.” [33] Other changes to AOB agreements included allowing “assignors to rescind without penalty within seven days of the execution of the agreement” and obligating “[a]ssignees . . . [to] provide a copy of an assignment agreement to an insurer within three business days of the execution of the agreement.” [34] The most notable difference, however, involved the one-way attorney’s fee provision where the provision “no longer applies to an assignee.” [35] Instead, the 2019 reforms encouraged insurers to avoid litigation through negotiation or appraisal. [36] In a lawsuit involving an AOB agreement, attorney’s fees may only be recovered as follows:

  • Less than 25 percent of the disputed amount, the insurer is entitled to an award of reasonable attorney fees.
  • At least 25 percent but less than 50 percent of the disputed amount, no party is entitled to an award of attorney fees.
  • At least 50 percent of the disputed amount, the assignee is entitled to an award of reasonable attorney fees. [37]

As companion legislation, the Florida legislature also passed Fla. Stat. 627.7153. [38] Under Fla. Stat. 627.1753, an insurer may restrict an insured’s “right to execute an assignment agreement” if the insurer provides (1) an insurance policy that does not restrict the insured’s “right to an execute an assignment agreement[,]” (2) the restricted policy at a lower cost compared with the unrestricted policy, (3) the policy restricting or prohibiting assignment in whole at a “lower cost than any policy [restricting or] prohibiting assignment in part[,]” and (4) specific language in any restricted policy as described in the statute. [39]

The Florida legislature enacted the 2019 reforms, in part, to reduce insurance premiums for Florida homeowners. [40] In the year following the reform, Citizens Property Insurance Corporation (“CPIC”), reported that insurance premiums dropped for almost 44,000 policyholders. [41] In addition, the reform helped reduce AOB litigation. [42] In 2020, “Florida [saw] less first party cases being filed . . . . CPIC alone [saw] their caseload drop from 2,000 to 1,750 suit per month.” [43] Despite the reduction, Florida lawmakers remained concerned about AOB abuse. [44]

In May 2022, the Florida Legislature approved additional property insurance reforms. [45] The reforms further limit the awarding of attorney’s fees in AOB cases. [46] The reform, titled SB 2D, prohibits a court from awarding attorney’s fees to an assignee in AOB litigation. [47] The reforms also severely “restrict the awarding of fee multipliers in property insurance disputes to ‘rare and exceptional circumstances.’” [48] Florida lawmakers believed such reforms necessary given Florida’s excessive contribution to homeowner insurance lawsuits across the United States. [49] Florida, responsible for “just 9% of property insurance claims, generates 79% of the nation’s homeowner insurance lawsuits.” [50] Florida lawmakers approved the reforms under the belief that “lawsuits . . . exploded in the past several years” despite the 2019 reforms. [51]

While Florida lawmakers acted to protect homeowners, [52] contractors rallied against the reform. [53] In June 2022, the Restoration Association of Florida and Air Quality Assessors, LLC, “filed [a] lawsuit in Leon County circuit court” testing the constitutional validity of the legislation. [54] In filing the lawsuit, “contractors contend that assignment of benefits helps homeowners who are unfamiliar with making sure insurance claims are handled properly.” [55] Contractors believe that AOBs help homeowners quickly address home damage due to inclement weather and other unforeseen circumstances. [56]

In Florida, contractors and Florida lawmakers are seemingly at odds with respect to AOBs. [57] The 2022 reforms remove the awarding of attorney’s fees altogether from AOB litigation, [58] which may both help and hurt homeowners in Florida by lowering property insurance premiums but making immediate home repair less accessible. AOBs will remain a contentious issue moving forward, and the reforms may lead to additional challenges.

[1] Jim Ash, Governor Signs Property Insurance Reforms and Condo Safety Measures , Florida Bar (May 27, 2022), https://www.floridabar.org/the-florida-bar-news/governor-signs-property-insurance-reforms-and-condo-safety-measures/.

[2] Mark Delegal & Ashley Kalifeh, Restoring Balance in Insurance Litigation: Curbing Abuses of Assignments of Benefits and Reaffirming Insureds’ Unique Right to Unilateral Attorney’s Fees 9 (2015), https://www.fljustice.org/files/123004680.pdf.

[3] Douglas Scott MacGregor, Florida Takes Aim at Assignment of Benefits Abuse: A Home Run or a Swing and a Miss? , in New Appleman on Insurance: Current Critical Issues in Insurance Law (2021).

[9] Ins. Info. Inst., Florida’s Assignment of Benefits Crisis: Runaway Litigation Is Spreading, and Consumers Are Paying the Price 7 (2018).

[12] Id. at 8.

[13] Id. at 4.

[17] Feller v. Equitable Life Assurance Soc. , 57 So. 2d 581, 583 (Fla. 1952).

[19] Ivey v. Allstate Ins. Co. , 774 So. 2d 679, 684 (Fla. 2000).

[20] Delegal & Kalifeh, supra note 2, at 3.

[21] Ins. Info. Inst., supra note 9, at 12.

[23] Id. at 13.

[24] What You Should Know About Water Damage in Your Home or Business , Kanner & Pintaluga, https://hurricanedamage.com/blog/what-to-know-about-water-damage/.

[25] Ins. Info. Inst., supra note 9, at 13.

[29] Id. at 14.

[32] Fred E. Karlinsky, Esq., Florida Assignment of Benefit Abuse: Recent Developments, Fed’n of Regul. Couns., https://www.forc.org/Public/Journals/2019/Articles/Summer/Vol30Ed2Article1.aspx.

[36] Cozen O’Connor, Florida’s “Assignment of Benefits” Bill: A Guide Through the New Statutory Framework , JDSupra (Apr. 26, 2019), https://www.jdsupra.com/legalnews/florida-s-assignment-of-benefits-bill-a-29861/.

[37] Fla. Stat. § 627.7152(10)(a) (2019).

[38] Fla. Stat. § 627.7153 (2019).

[39] Id. § 627.7153(2)(a)-(d).

[40] O’Connor, supra note 36.

[41] Rumberger Kirk, Impact of Florida’s New Assignment of Benefits Law: HB 7065 , JDSupra (May 26, 2020), https://www.jdsupra.com/legalnews/impact-of-florida-s-new-assignment-of-80753/.

[44] Ash, supra note 1.

[53] Jim Saunders, Contractors Challenge New Florida Insurance Law , Law (June 1, 2022), https://www.law.com/dailybusinessreview/2022/06/01/contractors-challenge-new-florida-insurance-law/.

[57] Ash, supra note 1; Saunders, supra note 53.

[58] Ash, supra note 1.

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Florida's Assignment of Benefits Law Updated to Better Protect Consumers

By dave bruns , july 03, 2019 11:02 am.

signing a contract for construction

Florida property owners, listen up: The rules have changed on how you can get your home repaired after a hurricane or other natural disaster by letting a contractor deal directly with your insurance company. The legislation, CS/HB 7065, is the biggest change to Florida law on assignment of insurance benefits in years. Whenever Florida is struck by a hurricane or other natural disaster, contractors flock to the area, going door to door and offering to start immediate repairs on homes and businesses if the property owner will sign over their insurance benefits to the contractor. These “assignment of benefits” contracts, also known as AOB, can result in a high-quality repair at a fair price by a licensed, insured contractor. But in recent years, insurers have been pressuring lawmakers to rein in abuses of these AOB contracts, especially lawsuits arising from disputes between contractors and insurers over how much to pay for repairs. In early 2019, Florida insurance regulators testified to the Legislature that that such lawsuits were skyrocketing, driving up insurance costs and threatening to drive some insurers out of the Florida market. Meanwhile, property owners have complained that insurers take too long to inspect property, approve repairs or authorize immediate temporary repairs to prevent future damage. The new law sets new time limits for insurers, property owners and contractors. Here are some of the major provisions of the new law:

  • If you sign an AOB agreement with a contractor, the contractor (called an “assignee” in the new law) must provide your insurer with an itemized, per-unit cost estimate of the work to be done. The contractor also must provide the insurer a copy of the AOB agreement within three days.
  • Often, roof damage to a home or business can result in water leaks, which can later turn into major mold and mildew problems. Homeowners sometimes agree to sign over benefits to contractors for a quick temporary repair to head off future loss. The new law limits these temporary repair agreements to $3000 or 1 percent of the coverage limit on such storm damage in your policy, whichever is greater.
  • If a dispute arises between the insurer and the assignee over how much of the loss will be covered, the assignee has to notify the insurer of intent to file a lawsuit over the dispute at least 10 days before the lawsuit is filed. Insurers have 10 days to respond, but insurers can get extra time if an emergency has been declared in your area because of a storm.
  • If your contractor sues your insurer to force them to pay more than they’re offering for the repair, and the final judgment in the lawsuit is up to 25 percent more than the insurer’s initial offer, your insurance company now will have the right to collect their attorney’s fees from the assignee. If the final judgment in a lawsuit is between 25 and 50 percent higher than the insurer’s initial offer, neither side can recover attorney’s fees. If the insurer’s initial offer was more than 50 percent lower than the final judgment in a lawsuit, the assignee can recover attorney’s fees from the insurer. This provision was meant to discourage lawsuits in cases where the disputed portion of the insurance settlement is relatively minor. However, if an insurer doesn’t inspect the property or authorize repairs within seven days of notification of a loss, the insurer must give up its right to recover attorney’s fees from a resulting lawsuit.
  • Previously, Florida courts had held that you had a right to sign over your insurance benefits to a contractor after a loss. Under the new law, insurers now can sell you an insurance policy that doesn’t allow you to assign your benefits to a contractor, although the insurer also must offer you a policy that does allow AOB contracts – possibly at a higher cost.

Read the Legislature’s analysis of the bill’s provisions here.

Cozen O'Connor's Property Insurance Law Observer

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

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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.

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Don't Make a Costly Mistake!

Understanding florida assignment of benefits (aob).

Don't make a costly MISTAKE!

We want to make Floridians aware of an important issue called AOB (Assignment of Benefits).  Click here to view the   AOB Fact Sheet   and   Red Flag Checklist   from the   Florida Office of Insurance Regulation . 

If you are insured with State Farm, please follow these tips to keep your rights with your claim:

  • If you have a property damage loss in your home, contact State Farm immediately to report the claim. We are here to help 24/7. 1-800-SFCLAIM (1-800-732-5246)
  • Be careful before signing anything without fully reading the documents. An AOB transfers the payment and many rights of your claim to the vendor or contractor for the services provided or to be provided. Keep your rights!
  • Preserve all building and/or plumbing materials removed by any contractor or vendor until you speak with State Farm.

If you have any additional questions about AOB, contact your local State Farm agent or www.fightfraud.today for additional details.

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Florida’s Property Insurance Reform: The Impact on Carriers and Insureds in the State of Florida

Rumberger | Kirk

The Florida Legislature passed Senate Bill 2-A (“SB2A” or the “Act”), which was signed into law on December 16, 2022.  The Act has the potential to significantly reduce litigation of first party property cases in the state of Florida.  This article summarizes key provisions of the Act that carriers should be aware of in order to protect their rights as well as ensure compliance with the Act. 

Summary of Key Provisions of the Act [1]

  • Bad Faith – Revises Florida’s Bad Faith Statute to eliminate the payment of an appraisal award or and the acceptance of an offer of judgment as a basis to file a bad faith action;  
  • Attorney Fees – The Act eliminates the right to attorney fees in residential and commercial suits;
  • Claims Handling Deadlines – The Act amends several deadlines related to an insurer’s claims handling requirements;
  • Notice of Claim – The Act shortens the time an insured has to file a claim and supplemental claim;
  • Mandatory Binding Arbitration – The Act permits carriers to include binding arbitration provisions within its policies;
  • Assignment Agreements – the Act eliminates Assignment of Benefits Contracts;

Key Provisions 

The Act eliminates an insured’s ability to file a bad faith action based solely on the payment of an appraisal award or the acceptance of an offer of judgment (by either party).  Prior to this amendment, the payment of an appraisal award acted as an adverse judgment entitling an insured to file a bad faith action.  Some background is important here.  The usual scenario played out like this: lawsuit and Civil Remedy Notice (“CRN”) are filed at the same time; carrier invokes appraisal and subsequently pays the award; Plaintiff files a motion for fees and costs; carrier attempts to settle the fee claim, but for an additional sum of money, is told it can obtain a release of all bad faith claims; carrier settles both the fee and bad faith claims for an increased amount.  Essentially, CRNs were (and arguably still are) being used as a type of extortion against carriers to procure a larger settlement, even where no legitimate basis for bad faith exists.  The legal fees and costs of litigating a bad faith action are astronomical in comparison to a breach of contract action.  There is much more discovery and many more issues.  Plaintiffs know this, and a cost-benefit analysis usually proves it is more cost effective to settle fifty post-appraisal bad faith claims, rather than litigate one. 

This scenario has played out in Florida for a long time.  In fact, the legislature attempted to address the issue back in 2019, when it amended the Bad Faith Statute to include a safe harbor period that prohibited the filing of a CRN for a period of 60 days where appraisal was invoked before a CRN was filed.  However, the statute did little to curb the abuse as most appraisals take longer than 60 days and most CRNs are filed before the carrier has had the chance to invoke appraisal.  The Act’s amendments are a welcomed change to the bad faith statute, and seek to reduce post-appraisal bad faith litigation.  It is a step in the right direction. 

It should be noted, however, that the difference between an insurer’s appraisal estimate and the final appraisal award can be used as evidence of bad faith, if a bad faith action is later filed on other grounds.  Further, if the carrier is found to have acted unfairly in its use of appraisal, the Act now allows the Office of Insurance Regulation (“OIR”) to revoke approval of the carrier’s appraisal forms, or prohibit the carrier from invoking appraisal for a period of time.

From a claims handling perspective, before claims enter litigation, it is important to evaluate whether appraisal is a viable option.  Appraisal benefits both insurers and insureds in ensuring prompt resolution of claims, while also avoiding the filing of a CRN for a period of 60 days.

Attorney Fees

The Act now eliminates the right to attorney fees in residential and commercial property insurance suits.  The Act took effect on December 16, 2022.  It is unclear whether the Act is intended to apply retroactively to bar entitlement to attorney fees in suits involving claims filed under policies that were issued before the Act took effect.  We expect the issue of retroactivity to be a hotly debated issue within the courts.  If the Act applies retroactively, there is no entitlement to attorney fees in any suit filed after December 16, 2022.  However, if the Act does not apply retroactively, the date of renewal of the policy must be after December 16, 2022 to bar entitlement to attorney fees and costs.  Lastly, although the Act eliminates the right to attorney fees, carriers will likely see an increase in litigation of current pending claims and/or claims not yet filed on policies that pre-date the Act.  

Claims Handling Deadlines

The Act amends several deadlines related to an insurer’s claims handling requirements under Fla. Stat. 627.70131.  This section goes into effect on March 1, 2023. Insurers should take important note of these changes:

  • Reduces the amount of time to acknowledge communication from its insured from 14 days to 7 days, unless there are factors beyond the insurer’s control. [2]
  • Reduces the amount of time to begin its investigation after receipt of a proof of loss from 14 days to 7 days, unless there are factors beyond the insurer’s control.
  • Reduces the amount of time to conduct a physical inspection after receipt of a proof of loss from 45 days to 30 days, if a physical inspection is required.
  • Requires an insurer to produce any estimate generated within 7 days after it is generated. The Act removes the insurer’s requirement to notify the insured of the right to request the estimates, since the insurer now must produce all estimates that are prepared.
  • Requires an insurer maintain detailed claim records of: (1) all claim communication, (2) any proof of loss received, (3) insurer’s requests for information; (4) any claim-related inspections; (5) any detailed estimates generated by the insurer; (6) beginning and end of any tolling periods; and (7) the insurer’s payment or denial of the claim.
  • Reduces the amount of time to pay or deny any initial, reopened, or supplemental claim from 90 days to 60 days, unless there are factors beyond the insurer’s control.

The requirements of this section may be tolled: (1) during mediation or other alternative dispute resolution proceeding under the policy; or (2) if the insured or their representative fails to provide requested claims information within 10 days after such request. Any request for information must be sent at least 15 days before the deadline to pay or deny the claim.

From a claims handling perspective, the Act requires insurer’s evaluate claims much faster with the ultimate goal of providing a prompt claim determination to its insured.  Insurers must quickly evaluate a claim and determine what information is needed from their insured to give it enough time to request information at least 15 days before the deadline to render a decision.  It is critical that the insurer have adequate procedures in place to comply with the new deadlines. 

Notice of Claim

The Act reduces the amount of time an insured has to file a claim or reopened claim from 2 years to 1 year.  It also reduces the amount of time an insured has to file a supplemental claim from 3 years after the loss to 18 months.  This is a welcomed change.  In Florida, there could be hundreds of weather events that occur over a period of years to an insured’s property.  Delayed reporting of a claim significantly reduces the ability of an insurer to adequately determine the cause and extent of the claimed damage.  It also has the effect of reducing the chances of payment on a claim due to the failure of the carrier to determine the cause and extent of damages.  The reduction in time to file a claim or supplemental claim should assist carriers and insureds in promptly adjusting claims, and having the potential to increase payment on claims, thus reducing litigation.     

Mandatory Binding Arbitration

The Act permits insurers to include mandatory binding arbitration provisions within their policies if: (1) they are contained in a separate endorsement; (2) the insurer provides a premium credit or discount; (3) the insured signs a form accepting the provision; (4) the endorsement establishes the insurer will comply with mediation prior to initiation of arbitration; and (5) the insurer offers a policy that does not require arbitration. 

Mandatory binding arbitration is a favorable tool to be used by both insurers and insureds to ensure prompt resolution of claims.  It provides a viable alternative to litigation, which often causes lengthy delays and increased costs, leaving the insured to wonder when their claim will be resolved.  Arbitration provisions will also provide immediate financial benefits to insureds looking to reduce premium costs, while preserving their right to have any dispute heard by a neutral party.  For insurers, it provides the benefit of reducing the exposure to litigation.  Insurers without mandatory appraisal provisions should evaluate whether mandatory binding arbitration provisions are a benefit it wishes to offer.

Assignment of Benefits

The Act eliminates Assignment of Benefits (“AOB”) contracts executed under a property insurance policy, effective January 1, 2023.  Any attempt by a policyholder to assign any post loss insurance benefit after January 1, 2023 is considered void, invalid, and unenforceable.  The Act puts the proverbial last nail in the coffin for AOB vendors in the state.  For context, according to the Insurance Information Institute, there were roughly 1,300 AOB lawsuits in Florida in the year 2000.  Three years later, the annual number increased to 79,000, and by 2018 there were roughly 135,000 AOB lawsuits through November – a staggering 70% increase in just 15 years. [3]   In many cases, insureds were largely unaware of the lawsuits being filed on their behalf.  Most insureds became aware of the lawsuits only after their carrier notified them that one had been filed.  AOB vendors were silently draining the coverage limits of insureds’ policies without ever notifying them of the cost of the work being performed or the repercussions of signing the AOB.  The Act puts a stop to AOB abuse in the state, and as a result, puts more money back into the hands of insureds and reduces abusive litigation in Florida.   

In summary, the Act takes positive steps to improve the insurance market in Florida for both insurers and insureds.  It has the potential to significantly reduce abusive litigation by eliminating AOBs and the one-way fee shifting provision.  The Act protects insureds’ rights by requiring insurers promptly and properly adjust claims, with the hopes of reducing disputes and potentially increasing payment of claims.  If a dispute does arise, the Act affords Florida’s insureds the right to resolve those disputes through use of alternative dispute resolution methods, rather than lengthy and costly litigation.  The Act has the ability to return Florida to a healthy insurance market, which ultimately means the potential for more options for insureds with reduced premiums.

[1] The Act includes several other provisions intentionally omitted from this article, as it falls outside the article’s intended scope. 

[2] Factors outside the insurer’s control are defined as: (1) a state of emergency issued by the Governor, a breach of security, or an information technology issue; and (2) actions by the insurer or insurer’s representative that constitute fraud, lack of cooperation, or intentional misrepresentation.

[3] https://www.insurancebusinessmag.com/us/news/breaking-news/aob-abuse-in-florida-rises-70-in-15-years-163448.aspx

Related Posts

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  • Breaking Down Bad Faith: Insurers’ Good Faith Duties and Defending Bad Faith Claims   Audio
  • Insurers Take Note: New Changes to Florida Law Mean Changes in Claims Handling & Roof Repairs in the Sunshine State   Audio
  • Automatic Liability: New Risk Under California’s Insurance Lapse Protection Statutes
  • Legal Update: Recent Changes to Florida Insurance Law and Its Effect on Litigation
  • McHugh, Thomas, and the Long-Term Risk of California Insurance Code Sections 10113.71 and 10113.72

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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FLORIDA ASSIGNMENT OF BENEFIT ABUSE: RECENT DEVELOPMENTS

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The debate in Florida over a controversial practice known as Assignment of Benefits, otherwise known as “AOB,” has ramped up in recent months as the discussion has made its way to the State’s Legislature and Supreme Court. AOB—the practice of assigning one’s right to receive benefits or make claims under an insurance policy—has long been a part of the health insurance industry, where insureds regularly assign their rights to make claims under health insurance policies to preapproved providers who then bill insurers directly for the cost of providing health care services to the insureds.  

In recent years, the practice has expanded beyond health insurance policies and has become commonplace in the homeowners’ insurance space. In a typical homeowners AOB claim, a policyholder assigns his or her right to file a claim under a homeowners’ insurance policy to a third-party restoration contractor who is hired by the homeowner to perform restoration or other repair services to the insured residence. The contractor then files a claim directly with the insurer that issued the policy. Often, the contractor performs the repairs and then files the claim without giving the insurer a meaningful opportunity to assess the loss. Insurers argue these claims lead to unnecessary repairs, inflated repair costs, and increased litigation costs, which, in turn, has resulted in higher insurance premiums for all. Restoration contractors claim that AOBs facilitate speedy repairs and alleviate any need for the insured to be involved in the claims process.  

While homeowners’ insurance AOB claims are occurring with greater frequency across the country, Florida has become a hotbed for AOB abuse due to its unique legal landscape, which makes it easier for unscrupulous contractors to game the system and artificially inflate claims costs. There are two key factors that have caused Florida to become ground zero for AOB abuse:  

  • Florida’s one-way attorneys’ fee statute; and
  • Florida courts have consistently held that the Florida Insurance Code permits insureds to assign their post-loss rights to make claims under insurance policies to third-parties without insurer consent. 

Most states permit insureds to assign their rights under a homeowners’ insurance policy after a loss has occurred without first securing the insurers’ consent, which makes it difficult for insurers to assess the true extent of loss that has occurred and keep costs under control. However, Florida stands apart because of its one-way attorneys’ fee statute, which is unique to the State.  

In Florida, if an insured or beneficiary prevails against an insurer in a first-party lawsuit, the court may order the insurer to pay the plaintiff’s reasonable attorneys’ fees. The law, however, does not afford those same rights to the insurers. Thus, if the insurer succeeds in defending the lawsuit, the contractor owes the insurer nothing. This one-sided fee shifting scheme, which was intended to even the playing field between insurers and insureds, incentivizes contractors and their attorneys to aggressively file lawsuits against insurers without having to risk the possibility of paying the insurers’ legal costs if they fail.  

While the Florida laws described herein apply without regard to the specific kind of loss that has occurred, water loss claims have presented the greatest opportunity for abuse, as they often invoke stressful situations for a homeowner and require quick action to mitigate damages. Moreover, South Florida has seen the greatest increase in litigation as a result of AOB. In 2000, roughly 1,300 AOB lawsuits statewide were reported. By 2013, that number grew to over 79,000, and by the end of 2018, nearly 135,000 lawsuits were filed in the state. That amounts to a 70 percent increase in 5 years. Water loss claims represent 75 percent of all litigation, with the tri-county area of South Florida—Miami-Dade, Broward, and Palm Beach counties—making up 96 percent.  

Florida Officials and Insurance Regulators Speak Out  

As unnecessary and artificially inflated claims and lawsuits have increased costs for insurers, premium rates have also risen despite loss numbers trending in the opposite direction. Insurers offering homeowners’ insurance in Florida continue to seek the approval of the Florida Office of Insurance Regulation (OIR) to increase premiums, especially for those insured in South Florida. According to OIR, the indicated water loss premium per insured property in South Florida is between $1,300 and $2,000 on average. Compared that to the rest of the state, where the average indicated water loss premiums are between $500 and $700.  

The continued rise of premium rates, irrespective of loss trends, resulted in a united call to action by Florida’s state officials and insurance regulators. In his State of the State address, Florida Governor Ron DeSantis called for meaningful AOB legislative reform. Moreover, Insurance Commissioner, David Altmaier, Citizens Property Insurance CEO, Barry Gilway, and Chief Financial Officer, Jimmy Patronis have been active in their advocacy for AOB reform. Through media advisories and presentations before the Florida Legislature, these officials have expressed their support for legislation aimed at combatting AOB abuse. CFO Patronis has also called on the Florida Bar to investigate plaintiff’s firms who are involved in excessive AOB litigation.  

Florida Lawmakers Pass Meaningful AOB Reform  

During the 2019 legislative session, the Florida legislature passed HB 7065 by Rep. Bob Rommel, with the goal of reducing AOB abuse in the state. The legislation establishes rights and obligations of both the assignees and assignors, and perhaps most important, eliminates the one-way attorney’s fee provision for assignees. Governor DeSantis signed the bill into law on May 23, 2019.  It will become effective on July 1, 2019.  

The bill requires assignment agreements to be in writing and signed by both the assignee and assignor. Agreements must allow assignors to rescind without penalty within seven days of the execution of the agreement, and the agreement may not impose administrative fees. Assignees must provide a copy of an assignment agreement to an insurer within three business days of the execution of the agreement. Assignees must now provide written estimates of services to be rendered, and indemnify the assignor, to include the waiver of the right to claim a lien against the property by the assignee and any subcontractors of the assignee.

Assignees will now be required to maintain records and provide those records when requested by an insurer. Assignees will also now be required to submit to examinations under oath and alternative dispute resolution (ADR) mechanisms contained in the insurance contract.

Insurers will be entitled to written notice specifying the damages in dispute, the amount claimed, and a pre-suit settlement demand from an assignee at least 10 days prior to the assignee filing suit. An insurer must respond to the pre-suit notice within 10 days of receipt by either making a settlement offer or proposing ADR. The bill discourages forum shopping by allowing a court to award attorney’s fees to an insurer if they voluntarily dismiss an action when an assignee brings an identical claim against the insurer in another court. If the dispute continues to trial, Florida’s one-way attorney’s fee provision for policyholders suing their insurance company no longer applies to an assignee. Attorney’s fees in a suit over a property insurance claim involving an AOB will now be determined by the difference in the amount recovered and the amount offered pre-suit. Fee awards will now be determined as follows:

  • If the difference between the judgment obtained and the settlement offer is less than 25% of the disputed amount, then the insurer is entitled to attorney’s fees.
  • If the difference between the judgment obtained and the settlement offer is at least 25% but less than 50% of the disputed amount, neither party is entitled to fees.
  • If the difference between the judgment obtained and the settlement offer is at least 50% of the disputed amount, the assignee is entitled to attorney’s fees.

Insurers will now be able to make available non-assignable property insurance policies in Florida. This provision has been likened to providing consumers with a choice similar to an HMO and PPO. Non-assignable policies must contain an 18-point font notice that the assignment of the policy is restricted.

Beginning in 2022, insurers will be required to submit claims data to OIR, including but not limited to specific data about claims adjustment, settlement timeframes, and trends, grouped by whether a claim was litigated or not litigated and by loss adjustment expenses. The Financial Services Commission will adopt a rule listing all final required data elements.

Florida Supreme Court Hears AOB Dispute  

As Florida lawmakers have been working on a legislative solution to the problem, the Florida Supreme Court has agreed to take up a closely watched AOB case out of St. Lucie County. On December 27, 2018, the Court accepted jurisdiction in the case of Restoration 1 of Port St. Lucie vs. Ark Royal Insurance Company to resolve an apparent conflict between the State’s Fourth and Fifth District Courts of Appeal (DCA). At issue is whether an insurer may restrict insureds’ right to assign post-loss benefits under a homeowners’ insurance policy by requiring that all named insureds and the mortgagee sign an AOB contract before it will be recognized by the insurer. The Fourth DCA answered that question in the affirmative, while the Fifth DCA has held that insurers may not limit insureds’ right to assign post-loss benefits under a homeowners’ insurance policy.

In this case, a husband and wife contracted with a water restoration company to fix water damage to their insured home, the purchase of which had been financed through a mortgage. The wife, without the consent of her husband or the mortgagee, agreed to “an assignment of benefits agreement assigning ‘any and all insurance rights, benefits, proceeds and any cause of action under any applicable insurance policies'” to the water restoration contractor.  

The homeowners’ insurance policy at issue contained a provision indicating that “[n]o 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 the policy.” The Fourth DCA held that this provision was not an impermissible restriction on the right to enter into post-loss AOB contracts and ruled in favor of the insurer.  

This will be an important case that will be closely monitored by interested parties.  

AOB abuse is a growing problem that seems to be gaining the attention of regulators, lawmakers, courts, and consumers across the nation. While most states must contend with state laws that permit assignment of rights without insurer consent, Florida lawmakers have struggled to address certain factors that have made it the epicenter of AOB abuse in the United States. The state’s one-way attorneys’ fee statute, coupled together with case law holding that insurers do not need to seek insurer consent before entering into AOB contracts with third-party contractors, have created a unique legal landscape that has made it far too easy for dishonest contractors and their attorneys to abuse the system.

As homeowner insurance premium rates skyrocket, interested parties will be watching closely to see how the industry, regulators, and consumers respond to the new AOB reform law. The Florida Supreme Court’s ruling in Restoration 1 of Port St. Lucie vs. Ark Royal Insurance Company may also have a profound impact on the industry. Given the current environment in Florida and the developments in Tallahassee, we could be looking at a new and improved homeowners’ insurance market by the end of 2019, but it is too early to tell. One thing is certain, if AOB reform is not successful in Florida, premium rates will continue to increase, and consumers will continue to suffer.

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Assignment of Benefits in Florida Will Soon Be Dead and Are Now Critically Examined

assignment of benefits florida

Recent Florida legislation makes the assignment of benefits for a property insurance policy illegal in Florida. Recent cases demonstrate that such assignment of benefit contracts will be critically examined by courts when insurance companies raise issues about their validity.

Last week, a Florida appellate Court ruled that a proposed assignment of benefit contract was void. 1 It noted the insurer’s argument and the issue to be determined:    

Citizens moved to dismiss the complaint with prejudice, contending that the assignment of benefits agreement, on its face, failed to comply with section 627.7152(2) (a)4., Florida Statutes (2021) (requiring that an assignment of benefits agreement ‘[c]ontain a written, itemized, perunit cost estimate of the services to be performed by the assignee’) rendering the assignment agreement invalid and unenforceable. Id. § 627.7152(2)(d) (providing: ‘An assignment agreement that does not comply with this subsection is invalid and unenforceable.’) More specifically, Citizens contended the assignment agreement did not contain ‘a written, itemized, per-unit cost estimate of the services to be performed by assignee’ as required by the statute. In response, Total Care contended that the assignment agreement contained an itemized per-unit cost estimate in compliance with the statute; Citizens lacked privity to challenge the assignment agreement; and non-compliance with the statute would render the assignment agreement voidable, not void, and—if voidable— Citizens would have no standing to challenge the assignment agreement since it was not a party to, or third-party beneficiary of, the assignment agreement.

The court noted that prior legislation required an estimate which was itemized:

Enacted by the legislature in 2019, section 627.7152, Florida Statutes (2021), governs assignment of benefits agreements. Subsection (2)(a) enumerates several requirements for a valid and enforceable assignment of benefits agreement. Relevant to the instant case, the statute requires: ‘An assignment agreement must… [c]ontain a written, itemized, per-unit cost estimate of the services to be performed by the assignee.’… In addition, section (2)(d) provides: ‘An assignment agreement that does not comply with this subsection is invalid and unenforceable.’

A mere listing of costs and services was found not to be sufficient:

While Total Care contends this document meets the statute’s requirement of ‘a written, itemized, per-unit cost estimate of the services to be performed by the assignee,’ we conclude it falls far short. It is not tailored to the insured or to the services to be performed on this particular property. Instead, it is simply a listing of services offered by Total Care, divided into two categories—’Emergency Service Price’ and ‘Non-Emergency Prices.’ The services listed under the two categories overlap nearly completely (the emergency category lists twenty-two services, while the non-emergency category lists eighteen identical services), with the difference being the cost of an available service performed on an emergency versus nonemergency basis. Such a generic menu of services available to any customer manifestly fails to comply with the ‘itemized, per-unit cost estimate of the services to be performed’ required by section 627.7152(2)(a) 4. Indeed, this document is not an ‘estimate’ at all, because it fails to set forth: the specific services being performed by Total Care on Mr. Bernal’s property;….”

The court cited with approval a similar case ruled upon last year:

We find persuasive the reasoning and holding of our sibling court in Air Quality Experts Corp. v. Fam. Sec. Ins. Co. , 351 So. 3d 32 (Fla. 4th DCA 2022), which is indistinguishable in all material respects from this case. In Air Quality, an assignee under a homeowner’s property insurance assignment agreement submitted bills to the insurer. When the insurer refused to pay, the assignee sued, attaching to the complaint the assignment agreement contract and two invoices. The assignment agreement included ‘a standard price list of the types of services offered by the assignee with their unit price.’ As the Fourth District explained, ‘[t]here was nothing in the attachment which tied the price list to the insured’s home so that it could be considered an estimate.’

The bottom line is that restoration contractors should expect their assignment of benefit contracts to be challenged by insurers in Florida. Those assignments will have to meet the letter of the law to be enforceable. Before long, this will be antiquated law because all assignments will eventually be disallowed based on the recently passed legislation.

Thought For The Day  

Lawyers spend a great deal of their time shoveling smoke.

—Oliver Wendell Holmes, Jr.

1 Total Car Restoration v. Citizens Prop. Ins. Corp. , No. 3D22-711, 2023 WL 2505937 (Fla. 3d DCA Mar. 15, 2023) .

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Florida Court Strictly Enforces New Assignment of Benefits Requirements

assignment of benefits florida

Alex Benarroche

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Florida Insurance Legal alerts Payment Disputes Restoration

Photo of 2 buildings under construction in Florida with Legal Alert Florida label

Restoration and roofing contractors often use an assignment of benefits agreement when performing repairs under an insurance claim. An assignment of benefits (AOB) , in the context of the construction industry, is an agreement that transfers insurance claim rights from the insured to a third-party contractor. This allows the contractor to deal directly with (and get paid by) the insurance provider.

These arrangements have their pros and cons and can often lead to litigation, disputes, and the potential for abuse. Florida has some relatively new laws governing AOBs — and, as a recent restoration contractor learned, they may be strictly enforced by the courts.

Florida’s Assignment of Benefits requirements

In 2019 Florida overhauled their assignment of benefits laws to curb growing concerns of AOB abuse within the state. 

“It is no secret that the State of Florida is currently in the midst an insurance crisis, which has resulted in numerous private insurance carriers to stop writing new homeowners policies in Florida, and for same carries, has resulted in bankruptcy or insolvency,” said insurance attorney  Jake Huxtable of West Palm Beach, Florida.

“Per the research, a big reason why Florida is in an insurance crisis today is because of the assignment of benefits (“AOB”) abuse and significant influx of AOB lawsuits being filed by contractors against insurance carriers throughout Florida, ever since the passage of Hurricane Irma,” Huxtable said. “There is no dispute that the high volume of AOB litigation in Florida has had a direct, negative impact on not only homeowners insurance carriers, but also on the premiums and taxes that all of us homeowners in Florida are legally required pay in order to own a home and have it insured in Florida, which just continue to skyrocket present day.”

Learn more:  Florida Property Insurance Crisis Poses Risk for Restoration Contractors

Given the sharp increase in AOB litigation, the court has strictly enforced these new requirements. Take, for example, a recent case out of a Florida District Court of Appeals.

AOB agreement invalidated for failure to meet strict requirements

The case in question is Kidwell Group, LLC v. United Property & Casualty Insurance .

Project Snapshot

  • Owner: Ben Kivovitz (Kivovitz)
  • Represented by: Jake Huxtable of Kelley Kronenberg Attorneys at Law
  • Represented by: Chad Barr of Chad Barr Law

Kivovitz’s Boynton Beach home was insured by United covering, among other things, direct physical losses to the property. In August of 2017, Kivovitz’s house sustained damage and a claim was submitted to United. Kidwell was brought in to perform the repairs in exchange for an assignment of benefits; allowing Kidwell to directly bill United for the work.

When the work was completed and invoiced, United allegedly failed to make full payment, leaving an unpaid balance of $3,000. Accordingly, Kidwell filed a breach of contract lawsuit against United. This case made it to the 4th District Court of Appeals, which upheld the trial court’s dismissal of Kidwell’s claim due to an insufficient AOB agreement .

The statute governing the requirements for Florida AOBs can be found under Fla. Stat. 627.7152 , and more specifically for the purposes of this case subsection (2)(a) which reads:

“An assignment agreement must: 1. Be in writing and executed by and between the assignor and the assignee… 4. Contain a written, itemized, per-unit cost estimate of the services to be performed by the assignee”

The court began its analysis by stating that the plain language of the statute requires that at the time the AOB is signed, the property owner must be provided with an itemized list of the services to be performed and the costs thereof.

Upon review of the AOB agreement at issue, they affirmed the trial court’s dismissal of Kidwell’s claim:

“While [Kidwell] included the invoice as an attachment to the complaint along with the assignment of benefits, such invoice was unexecuted and dated five days after the assignment was executed… As such, the trial court properly concluded the assignment did not contain a written, itemized, per-unit cost estimate of services to be performed by [Kidwell] as required by sections 627.7152(2)(a)1 and 627.7152(2)(a)4.”

For restoration contractors in Florida, this serves to show that the courts are willing to strictly enforce these provisions and requirements to stifle the rising abuse of AOBs .

Prudent contractors should carefully review these requirements and ensure that their processes are in line with these new laws — specifically when it comes to cost breakdowns. As with every transaction, being upfront and communicating the services and costs clearly and upfront can help to avoid these types of disputes.

Related coverage : Ratings Downgrade Delivers Another Huge Blow to Florida’s Struggling Property Insurance Market

Thoughts from the attorney of record

Mr. Huxtable, the attorney representing United Property Insurance in this case had this to say about the result:

“The research and numbers don’t lie, and it is clear that the Legislature’s intent and purpose in enacting the AOB reform statute, 627.7152, was to put a stop to the AOB abuse by contractors in Florida, in hopes of halting and reducing the outrageously high number of AOB lawsuits that we’ve continuously seen being filed by contractors since 2017.” “Yet, even since the passage and enactment of the new AOB reform statute, there has nonetheless been thousands of AOB lawsuits that these financially-motivated contractors continue to initiate and pursue, without remorse, across the courts in Florida claiming to have standing to sue based upon illegal, non-compliant AOBs that they 100% know do not comport or comply with the new AOB law, but they just don’t care and have continued to pursue their old ways by abusing AOBs and taking advantage of homeowners, to the detriment of everybody in Florida.” ‘But now that we have this new appellate opinion that I was fortunate enough to argue where the 4th DCA upheld the Legislature’s intent in enacting the AOB reform statute, I am hoping that all the other appellate and trial courts in Florida fall in line and enforce the Legislature’s purpose for creating this new law in the first place; that is, to finally curb the AOB abuse and put an end to the insurance crisis in Florida. Kudos to the 4th DCA for making the right decision in this AOB case of first impression, and I am humbled to have been a part of it.”

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EINSURANCE

Homeowners Insurance Florida – Assignment of Benefits (AOB)

homeowners insurance Florida

To many homeowners the clauses buried deeply in their insurance policies are overlooked. They contain lots of apparent legal mumbo-jumbo with probably no real impact on one’s coverage until disaster strikes. If you insure property in Florida you may want to study more closely a clause that can cause you severe problems and is greatly responsible for raising your premiums. This clause is Assignment of Benefits, “AOB”.

What is an Assignment of Benefits (AOB)?

From the website of the Florida Insurance Regulator we have an explanation:

An Assignment of Benefits, or an AOB, is a document signed by a policyholder that allows a third party, such as a water extraction company, a roofer, or a plumber, to “stand in the shoes” of the insured and seek direct payment from the insurance company.

AOBs have been a part of Florida’s marketplace for more than a 100 years. 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. According to the Department of Financial Services, there were 405 AOB lawsuits across all 67 Florida counties in 2006, and that number had risen to 28,200 by 2016.

What Is The Purpose of Assignment of Benefits?

This clause is designed to appear to relieve the homeowner of the hassles of settling claims after they have been paid what they are owed from a loss. In fact, it is an agreement that, once signed, transfers the insurance claims rights or benefits  of the policy to a third party. An AOB gives the third party authority to file a claim, make repair decisions and collect insurance payments without the involvement of the homeowner.

How Does Assignment of Benefits Work?

For example, you as a homeowner have a claim from a storm, say for $10,000 of repairs. An attorney or contractor doing home repairs, approaches you, offers to pay the claim in full and, with your permission, settle with the insurance company. Perfect, you think.  You may be presented with a document to sign so that repairs may proceed. It may well contain AOB language. Read it carefully.

The attorney/contractor then sues the insurer for $1,000,000 citing all types of shortcomings, deficiencies and skull duggery in the claim settlement.

Assignment of Benefits Florida Homeowners Insurance

This action is occurring so often in Florida that premiums have been raised and the legislature has been pummeled by insurers and homeowner groups to make changes to the law. To no avail, so far.

At a recent panel discussion put on by Demotech, the question was asked, “What if the legislature was giving a small set of trial lawyers $1 billion a year. And what if you and every one of the six million property homeowners in Florida had to write a $400 check each year to contractors and their lawyers?  That’s a different way of looking at this issue.  But that’s what’s happened.”

An insurer in Florida, known as the insurer of last resort as it is owned by the state and is intended to insure homeowners who cannot obtain coverage from any other insurer, Citizens Property Insurance Corporation, has declared that it is receiving over 350 claims each month for AOB claims from non-homeowners.

If you want to learn more, you can read our Florida Homeowners Insurance State Guide to find affordable homeowners insurance in Florida.

Florida Assignment of Benefits Legislation

The legislature has been unresponsive, even from efforts within the government. The Office of Insurance Regulation crafted and submitted a bill this year to clarify that only the homeowner claimant would be entitled to file a suit. It, and similar reform measures, failed to pass. This clause appears in many other states also, but Florida is the leader, far and away, in its use by third parties to move you as claimant out of their way to proceed.

What Should You Do In Event of A Claim?

Read your policy. Even if not completely understandable, it will give to you a good start. Contact your insurance company or agent. Don’t sign any AOB with blank spaces. Don’t feel obligated to sign it. Your claim will be satisfactorily adjusted in all likelihood. If you need any homeowners insurance, check our free home insurance quote services .

But be aware: if you sign this agreement and there is a dispute among the other parties with litigation resulting, you may well be brought in to it. If the insurer or the contractor/attorney are not satisfied with monies received you may be seen as responsible for the additional payments and a lien placed upon your property.

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assignment of benefits florida

Florida's assignment of benefits crisis

Runaway litigation is spreading, and consumers are paying the price.

  • DOWNLOAD TO PDF

It is a standard practice throughout the insurance world: As a convenience, a policyholder grants a third party – an auto glass repair company, a medical practitioner, a home contractor – permission to directly bill an insurer to settle a claim. That practice is called an assignment of benefits, usually known by the acronym, AOB.

In Florida, abuse of AOBs has fueled an insurance crisis. The state’s legal environment has encouraged vendors and their attorneys to solicit unwarranted AOBs from tens of thousands of Floridians, conduct unnecessary or unnecessarily expensive work, then file tens of thousands of lawsuits against insurance companies that deny or dispute the claims. This mini-industry has cost consumers billions of dollars as they are forced to pay higher premiums to cover needless repairs and excessive legal fees. And consumers often do not even know that their claims are driving these cost increases.

The abuse therefore acts somewhat like a hidden tax on consumers, helping to increase what are already some of the highest insurance premiums in the country.

This report discusses how AOB abuse works, how and why it is spreading, and how it is contributing to higher insurance costs for Florida consumers.

You May Also Like: Download the accompanying PowerPoint presentation here .

Please click on the file name below to view the white paper in PDF format. You will need Adobe Acrobat Reader to view the file.

Download aobfl_wp_031319.pdf

You can download Adobe Acrobat Reader, free of charge, from the Adobe website ( https://www.adobe.com/products/acrobat/readstep.html ).

Note: Printer fonts may vary by browser and version of Adobe Reader.

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assignment of benefits florida

IMAGES

  1. Understanding Florida Assignment of Benefits

    assignment of benefits florida

  2. The Current State of Assignment of Benefits Litigation in Florida

    assignment of benefits florida

  3. Assignment of Benefits in Florida Will Soon Be Dead and Are Now

    assignment of benefits florida

  4. Assignment of Benefits Form Homeowners Insurance Template

    assignment of benefits florida

  5. Assignment of Benefits Under Florida Law: Businesses and Insurers

    assignment of benefits florida

  6. Assignment of Benefits (AOB) Florida Senate Bill 122 • Tropical

    assignment of benefits florida

COMMENTS

  1. Assignment of Benefits (AOB)

    What is an assignment of benefits? An AOB is an agreement that transfers the insurance claims rights or benefits of the policy to a third party. An AOB gives the third party authority to file a claim, make repair decisions, and collect insurance payments without the involvement of the homeowner. AOBs have been used with life and health ...

  2. PDF ASSIGNMENT OF BENEFITS

    An assignment of benefits (AOB) is a legal contract that allows you, as the policyholder to transfer your insurance rights to a third-party (assignee), ... contact the Florida Department of Financial Services' toll-free Insurance Consumer Helpline at 1-877-MY-FL-CFO (693-5236).

  3. The Current State of Assignment of Benefits Litigation in Florida

    On May 25, 2022, Florida lawmakers approved property insurance reforms that remove attorney's fees, with respect to assignment of benefits ("AOB") property insurance litigation. [1] One-way attorney's fees are a longstanding problem in Florida, [2] and the reforms come at a time when AOB litigation increasingly affects homeowners in a ...

  4. PDF ASSIGNMENT OF BENEFITS

    ASSIGNMENT OF BENEFITS If you are asked to sign an assignment of benefi ts form, make sure you read it carefully and understand clearly what rights and benefi ts under your insurance policy you may be signing away. Ask questions until you understand and be wary of any vendor

  5. Impact of Florida's New Assignment of Benefits Law: HB 7065

    Learn how Florida's new law HB 7065, which took effect on July 1, 2019, has reduced the number of assignment of benefits (AOB) agreements between insureds and third parties. Find out how this law has affected Florida's insurers and courts, and what are the upcoming changes and challenges.

  6. Assignment of Benefits Resources

    Learn about the assignment of benefits (AOB) or third-party vendor contract that allows a third party to seek payment directly from your insurance company for repairs. Find out the concerns, risks, precautions, and cancellation options for AOBs in Florida. See the data call report and reform updates from OIR.

  7. An Update on Assignments of Benefits for Florida Contractors

    As of the date of this post, under the December 16, 2022 revisions to 627.7152, Florida Statutes, contractors can use an assignment of benefits, and homeowners can enter into an assignment of benefits, if the insurance policy being assigned was issued on or after July 1, 2019 and before January 1, 2023. Based on this language, it appears that a ...

  8. The Florida Contractor's Guide to AOBs: Laws, Requirements ...

    In Florida, the use of an assignment of benefits (AOB) has become increasingly popular as a means of streamlining property insurance claims. They also have come under fire from insurance carriers, and as part of the recent sweeping property insurance reforms in Florida, the Florida legislature banned the future use of AOBs in property claims.

  9. Statutes & Constitution :View Statutes : Online Sunshine

    The 2023 Florida Statutes (including Special Session C) 627.7152 Assignment agreements.—. (a) "Assignee" means a person who is assigned post-loss benefits through an assignment agreement. (b) "Assignment agreement" means any instrument by which post-loss benefits under a residential property insurance policy or commercial property ...

  10. Florida's Assignment of Benefits Law Updated to Better Protect Consumers

    The legislation, CS/HB 7065, is the biggest change to Florida law on assignment of insurance benefits in years. Whenever Florida is struck by a hurricane or other natural disaster, contractors flock to the area, going door to door and offering to start immediate repairs on homes and businesses if the property owner will sign over their ...

  11. Florida Insurance Ruling Sets Precedent on New Assignment-of-Benefits

    The state legislature added Florida Statutes Sec. 627.7152, which covered assignment agreements and required contractors to follow new rules to prevent them from taking advantage of homeowners and ...

  12. Florida's "Assignment of Benefits" Bill: A Guide Through the New

    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.

  13. Chapter 627 Section 7152

    Chapter 627 Entire Chapter. SECTION 7152. Assignment agreements. 627.7152 Assignment agreements.—. (1) As used in this section, the term: (a) "Assignee" means a person who is assigned post-loss benefits through an assignment agreement. (b) "Assignment agreement" means any instrument by which post-loss benefits under a residential ...

  14. Understanding Florida Assignment of Benefits

    If you have a property damage loss in your home, contact State Farm immediately to report the claim. We are here to help 24/7. 1-800-SFCLAIM (1-800-732-5246) Be careful before signing anything without fully reading the documents. An AOB transfers the payment and many rights of your claim to the vendor or contractor for the services provided or ...

  15. Florida's Property Insurance Reform: The Impact on Carriers and

    The Florida Legislature passed Senate Bill 2-A ("SB2A" or the "Act"), which was signed into law on December 16, 2022. ... Assignment of Benefits. The Act eliminates Assignment of Benefits ...

  16. Florida Assignment of Benefit Abuse: Recent Developments

    RECENT DEVELOPMENTS. The debate in Florida over a controversial practice known as Assignment of Benefits, otherwise known as "AOB," has ramped up in recent months as the discussion has made its way to the State's Legislature and Supreme Court. AOB—the practice of assigning one's right to receive benefits or make claims under an ...

  17. Assignment of Benefits in Florida Will Soon Be Dead and Are Now

    Citizens moved to dismiss the complaint with prejudice, contending that the assignment of benefits agreement, on its face, failed to comply with section 627.7152(2) (a)4., Florida Statutes (2021) (requiring that an assignment of benefits agreement '[c]ontain a written, itemized, perunit cost estimate of the services to be performed by the ...

  18. Florida Court Strictly Enforces New Assignment of Benefits ...

    Florida's Assignment of Benefits requirements. In 2019 Florida overhauled their assignment of benefits laws to curb growing concerns of AOB abuse within the state. "It is no secret that the State of Florida is currently in the midst an insurance crisis, which has resulted in numerous private insurance carriers to stop writing new homeowners ...

  19. What Florida's New Insurance Statute (SB-2A) Means for Contractors

    Section 627.7152—Florida's assignment of benefits law passed in 2019 and amended in May of 2022—is changed in two significant ways. First, 627.7152 (2) (a) (1) is added, and reads as follows: An assignment agreement must: be executed under a residential property insurance policy or under a commercial property insurance policy as that term ...

  20. AOB Submission

    You must have a valid claim and policy number to submit assignment of benefits documents online. The policy number can be found on the policyholder's Declarations page. Policyholders can submit a claim online through myPolicy or by calling our claims hotline at 866.411.2742. All other authorized individuals must call our Claims hotline to submit claims.

  21. Homeowners Insurance Florida

    An Assignment of Benefits, or an AOB, is a document signed by a policyholder that allows a third party, such as a water extraction company, a roofer, or a plumber, to "stand in the shoes" of the insured and seek direct payment from the insurance company. AOBs have been a part of Florida's marketplace for more than a 100 years.

  22. Statutes & Constitution :View Statutes : Online Sunshine

    The 2023 Florida Statutes (including Special Session C) 627.7153 Policies restricting assignment of post-loss benefits under a property insurance policy.—. (1) As used in this section, the term "assignment agreement" has the same meaning as provided in s. 627.7152. (a) The insurer makes available to the insured or potential insured at the ...

  23. Florida's assignment of benefits crisis

    That practice is called an assignment of benefits, usually known by the acronym, AOB. In Florida, abuse of AOBs has fueled an insurance crisis. The state's legal environment has encouraged vendors and their attorneys to solicit unwarranted AOBs from tens of thousands of Floridians, conduct unnecessary or unnecessarily expensive work, then ...