End of an Era? nEw Bill sEEks To limiT assignmEnT of BEnEfiTs liTigaTion
Construction Law Section
Chairs: Gregg Hutt - Trenam Law and Katherine Heckert - Carlton Fields
proponents of the bill have
touted the legislation as a
consumer protection measure
in response to escalating
O
n May 23, 2019,
Governor Ron
DeSantis signed House
Bill 7065, amending
certain provisions of Section 627,
Florida Statutes, to provide for
substantial changes in the way
assignments of insurance benefits
(AOB) may be made to third-
parties. 1 Proponents of the bill,
largely within the homeowner’s
insurance industry, touted the
legislation as a consumer protection
measure in response to escalating
abuse of AOBs by remediation
contractors. The bill’s proponents
further argued that such abuse has
ultimately led to inflated claims,
less coverage, extensive litigation,
and higher policy rates for Florida
property owners. Those opposed to
the bill argued that AOBs provide
a channel to property owners to
swiftly remediate damage following
a loss to insured property, while
incurring little to no out-of-pocket
expenses for the policyholder.
The new law imposes several
new requirements for the
execution, validity, effect, and
coverage of AOBs, while creating
a formula that will determine
which party, if any, receives an
award of attorney’s fees should
litigation related to an AOB result
in a judgment. Specifically, the
law defines the term “assignment
agreement” as “any instrument
by which post-loss benefits under
24
abuse of assignment of
insurance benefits.
a residential [or commercial]
property insurance policy…are
assigned or transferred…to or
from a person providing services
to protect, repair, restore, or
replace property or to mitigate
further damage to the property.”
Another key aspect of the law
is that it requires the contractor-
assignee to demonstrate that the
insurer is not prejudiced by the
AOB and the work completed.
This includes, but is not limited
to, newfound requirements that
the contractor-assignee maintain
records of all services provided
under the AOB, and furnish the
insurer with a copy of the AOB
within three business days of
execution or beginning work.
Many insurers advocating for the
passage of the bill complained that
they oftentimes would not receive
such information until after work
had already been completed
and damaged property had been
disposed of, prejudicing their right
to investigate the claim prior to
making a coverage determination.
The statute also imposes new
duties owed to policyholders upon
contractor-assignees, requiring
accurate and updated estimates
of the scope of work to be
performed as supplemental
repairs become necessary. This
requirement may prove to keep
policyholders informed throughout
the frequently varying stages of
the remediation process, while
also holding contractor-assignees
more accountable to insurers for
“showing their work” before they
can recover policy proceeds as a
third-party beneficiary.
While these revisions appear
to hold contractors seeking to
perform work under an AOB more
accountable to both insurers and
policyholders, it may not serve
to completely suppress litigation
initiated by legally responsible
contractors. Nevertheless, the
greater concern the law presents
to contractors and other proponents
of AOBs is that it enables insurers
to now write policies prohibiting
AOBs, in whole or in part. As
prior Florida legislation permitting
insurers to abrogate certain forms
of coverage has proven, this aspect
of the law may ultimately prove to
significantly reduce future litigation,
simply because the coverage is less
readily available
to insureds. n
Ch. 2019-57,
Laws of Fla.
(2019).
1
Author:
Frank T. Moya -
Carlton Fields
SEPT - OCT 2019
|
HCBA LAWYER