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The Current State of Assignment of Benefits Litigation in Florida

assignment of insurance proceeds florida

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

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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Policyholders Are No Longer Permitted To Assign Their Insurance Benefits in Florida

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Florida’s Senate Bill 2-A, which went into effect on December 16, 2022, has brought significant changes to Florida’s property insurance landscape, particularly in the realm of Assignment of Benefits (AOB). This blog post aims to shed light on the implications of these changes for homeowners in Florida.

What is an Assignment of Benefits?

An “Assignment of Benefits” or AOB is essentially the transfer of contractual rights from one party to another. In the context of insurance, this means policyholders can assign their benefits, such as the right to receive insurance payouts, to another party. Once the assignment is made, the assignee gains the authority to enforce the insurance contract, including taking legal action against the insurer if necessary.

Prohibition of Assignment of Benefits

Although Assignment of Benefits were previously permitted in Florida, Senate Bill 2-A amended Florida law to prohibit Assignments of Benefits in certain circumstances. The pivotal change brought about by Senate Bill 2-A is the prohibition of assigning any post-loss benefits under any residential property or any commercial property insurance policies issued after January 1, 2023. This means that property owners with policies issued after this date are no longer allowed to assign their insurance benefits to third parties. However, homeowners with policies issued before 2023 are not affected by this change; they can continue to use the AOB process.

While the intent behind this change is to reduce the strain on insurers and potentially lower prices for consumers in the long run, its immediate impact on homeowners is notable. Ironically, while policyholders still bear the obligation to mitigate damage and protect their properties, insurers have made it more challenging to do so by eliminating the AOB option. This could potentially lead to policyholders facing difficulties in receiving prompt compensation and repairs, particularly in the aftermath of a disaster.

Navigating Home Insurance Claims Without AOB

Despite the changes, homeowners can still effectively manage their home insurance claims. Some recommendations for homeowners to still effectively manage their claim, and receive prompt compensation and repairs, are as follows:

Document Everything: Keep detailed records of damage, repair estimates, and communications with your insurer. This documentation will be crucial when negotiating your claim.
Seek Professional Assistance: Hire a reputable contractor or service provider to assess the damage, provide repair estimates, and assist you in navigating the insurance claim process.
Legal Assistance: Consider consulting an attorney experienced in property insurance claims to guide you through the process, especially if disputes arise with your insurer.
Regular Communication: Stay in close contact with your insurer throughout the claims process, ensuring transparency and clear communication.
Advocate for Fair Compensation: Don’t hesitate to negotiate with your insurer to ensure you receive fair compensation for property damage and repairs.

The changes brought about by Florida’s Senate Bill 2-A regarding Assignment of Benefits have significant implications for homeowners. While the intent is to address concerns raised by insurers, the immediate impact on policyholders is increased responsibility in managing insurance claims.

Homeowners should be aware of whether these changes apply to their policies and, if so, be prepared to take a more active role in the claims process. By being proactive and informed, homeowners can still work towards fair compensation for their property damage and repairs, even in the absence of the assignment of benefits option.

Florida Statutes 675.114 – Assignment of proceeds

Terms used in florida statutes 675.114.

Beneficiary : A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
Obligation : An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
person : includes individuals, children, firms, associations, joint adventures, partnerships, estates, trusts, business trusts, syndicates, fiduciaries, corporations, and all other groups or combinations. See Florida Statutes 1.01

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

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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Recent Florida Ruling on Post-Loss Assignment of Benefits

Assignment of benefits is one of the highly debated topics facing policyholders and insurance companies in first-party property disputes. You can find many entries discussing assignment of benefits on our blog.

In Bioscience West, Inc. v. Gulfstream Property and Casualty Insurance Company , 1 the insured suffered a water damage loss and hired an emergency water mitigation company to perform emergency water removal and construction services on her home. She executed a document titled “Assignment of Insurance Benefits” that authorized the company to directly bill and receive payment from the insurance company for its mitigation services:

I hereby assign any and all insurance rights, benefits, and proceeds pertaining to services provided by BIOSCIENCE WEST INC. under the above referenced policy to BIOSCIENCE WEST, INC. I hereby authorize direct payment of any benefits or proceeds to my property . . ., as consideration for any repairs made by BIOSCIENCE WEST, INC.

The insured assigned the post-loss benefits and proceeds of her policy without the insurance company’s consent.

The insurance policy’s assignment provision stated: “Assignment. Assignment of this policy will not be valid unless we give our written consent.”

When the insured filed a claim, the insurance company denied the claim, concluding that the claimed damages were not covered by the policy. The water mitigation company then filed a lawsuit against the insurance company because it was an assignee of the right to recover a benefit under the insured’s policy. In a ruling on a motion for summary judgment, the trial court concluded that the insured was precluded from assigning the benefits of her homeowner’s insurance to the emergency water mitigation company, without first receiving the insurer’s consent.

On appeal, the Second District Court of Appeal, looked at the plain meaning of the phrase “assignment of this policy” and noted there was no contractual language restricting the assignment of benefits post-loss : 2

Gulfstream does not and cannot argue that the entire policy was unilaterally transferred from Ms. Gattus to Bioscience, which would have been void under the language of the policy’s anti-assignment clause. Instead, it is clear that Ms. Gattus merely assigned to Bioscience the “insurance rights, benefits, and proceeds pertaining to services provided by” the policy in consideration for Bioscience’s emergency mitigation services and authorization to directly bill and to be directly paid by Gulfstream. (Emphasis added). Stated differently, it was a post-loss assignment of a benefit under the policy to Bioscience, namely a right to seek payment for the mitigation services it rendered under the policy, not an assignment of “this policy” issued by Gulfstream to Bioscience. See Peck v. Pub. Serv. Mut. Ins. Co ., 114 F. Supp. 2d 51, 56 (D. Conn. 2000) (“An assignment before a loss involves a transfer of a contractual relationship, whereas an assignment after a loss is the transfer of a right to a money claim.” (citing 3 Couch on Insurance § 35.7 (3d ed. 1999))). A review of the “loss-payment” provision provides support for our interpretation that the “Assignment” provision of the insurance policy was not intended to apply to assignments of benefits derived from the policy but instead to assignments of the entire policy. See Cespedes , 161 So. 3d at 584 (noting construction of an insurance contract as a whole). Specifically, an examination of the loss-payment provision demonstrates that Gulfstream contemplated the need to pay third parties who were “legally entitled” as follows: “[Gulfstream] will pay you unless some other person . . . is legally entitled to receive payment.” (Emphasis added). In sum, Gulfstream anticipated the need to pay those “legally entitled to receive payment” under the policy, which, pursuant to Ms. Gattus’s “Assignment of Insurance Benefits” agreement with Bioscience, entitled Bioscience to receive any payments due under the policy. Thus, there is no contractual language restricting the post-loss assignment of benefits under “this policy” without Gulfstream’s consent. * * * Even if an insurance policy contained a specific, articulate provision precluding an insured’s post-loss assignments of benefits without the insurer’s consent, Florida case law yields deep-rooted support for the conclusion that post-loss assignments do not require an insurer’s consent. See One Call Prop. Servs. Inc ., 165 So. 3d at 755 (“Even when an insurance policy contains a provision barring assignment of the policy, an insured may assign a post-loss claim.”). Nearly 100 years ago, the Florida Supreme Court recognized that provisions in an insurance policy requiring consent to assignment of that policy do not apply to assignments after a loss. W. Fla. Grocery Co. v. Teutonia Fire Ins. Co ., 77 So. 209, 210-11 (Fla. 1917) (“The policy was assigned after loss, and it is a well-settled rule that the provision in a policy relative to the consent of the insurer to the transfer of an interest therein does not apply to an assignment after loss.”). This principle was reaffirmed in 1998, when our supreme court explained that “an insured may assign insurance proceeds to a third party after a loss, even without the consent of the insurer.” Lexington Ins. Co. v. Simkins Indus., Inc ., 704 So. 2d 1384, 1386 n.3. (Fla. 1998). As the First District recently observed, “[o]n this point we find an unbroken string of Florida cases over the past century holding that policyholders have the right to assign such [post-loss] claims without insurer consent.” Sec. First Ins. Co. v. State, Office of Ins. Regulation , 40 Fla. L. Weekly D1449, D1449 (Fla. 1st DCA June 22, 2015). We agree and hold that post-loss insurance claims are freely assignable without the consent of the insurer. Id . (holding that post-loss insurance claims are assignable without the consent of the insurer); One Call Prop. Servs. Inc ., 165 So. 3d at 755 (same); Accident Cleaners, Inc., 40 Fla. L. Weekly at D863 (“Dating back to 1917, the Florida Supreme Court recognized that provisions in insurance contracts requiring consent to assignment of the policy do not apply to assignment after loss.”); Citizens Prop. Ins. Corp. v. Ifergane , 114 So. 3d 190, 195 (Fla. 3d DCA 2012) (“Post-loss insurance claims are freely assignable without the consent of the insurer.”).

The Second District Court of Appeal held that the policy did not restrict the assignment of benefits after a loss has occurred—a financial benefit derived from the policy. The plain language of the policy merely prohibited the insured’s unilateral assignment of the entire policy.

1 Bioscience West, Inc. v. Gulfstream Prop. & Cas. Ins. Co. , No. 2D14-3946, (Fla. 2d DCA Feb. 5, 2016) . 2 Id. at 5-6; Id. at 8-9.

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The Florida Contractor’s Guide to AOBs: Laws, Requirements, and FAQs

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. But they’re not gone yet — at least for insurance policies issued before 2023.

But even for those pre-2023 policies, Florida law extensively regulates the use of AOBs. Whether you’re a roofer, restoration pro, or general contractor, you need to know about these rules and regulations if you want to legally use an AOB in Florida. The cost of violating these rules is high, often meaning the AOB is void and entirely unenforceable! So read on to make sure you comply with Florida AOB law.

Table of Contents

How Recent Property Insurance Reforms in Florida Affect AOBs

In December 2022, the Florida legislature enacted Senate Bill 2-A, a game-changing law that transformed the property insurance landscape in Florida. Among other major changes to Florida property insurance and claims, SB 2-A effectively outlawed the future use of assignment of benefits in property insurance claims. Under the new reforms, any homeowner’s insurance policy or commercial property insurance policy that issued on or after January 1, 2023 is not eligible for an AOB.

In other words, due to the 2022 Florida property insurance reforms, neither homeowners nor business property owners can enter an AOB if their insurance policy issued on or after January 1, 2023 .

Is an Assignment of Benefits Enforceable under Florida Law?

Maybe. The answer depends on whether the underlying policy issued before January 1, 2023, and whether the assignment of benefits complies with all the requirements of Section 627.7152, Florida Statues. If the answer to either of those questions is no, then the AOB is not enforceable for property claims in Florida.

Requirements for an Enforceable AOB in Florida

The issue of whether an AOB in Florida is enforceable is complicated. To make the issue more understandable, we’ve broken it down in the sections below.

The Underlying Policy Must Have Issued Before January 1, 2023

As we’ve said already, the threshold question for whether an AOB is enforceable in Florida is when the applicable policy issued. If the policy issued on or after January 1, 2023, that’s the end of the story — any AOB based on that policy is unenforceable, full stop.

The AOB contract must meet the requirements of Section 627.7152(2), Florida Statutes.

If the insurance policy issued before 2023, then the AOB still must comply with the rest of Section 627.7152, Florida Statutes. In particular, under Section 627.7152(2)(a), an assignment of benefits is not enforceable in Florida unless the AOB contract meets all of the following requirements:

The AOB contract must be in writing and signed by both parties.

Florida law requires that an AOB contract “[b]e in writing and executed by and between the assignor and the assignee.” Section 627.7152(2)(a)(2), Florida Statutes .

This one is straightforward: An AOB isn’t enforceable in Florida unless both your company and the policyholder sign a written AOB contract.

The AOB contract must explicitly allow the policyholder to rescind the AOB without penalty within certain periods

Florida law requires that an AOB contract “[c]ontain 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.” Section 627.7152(2)(a)(3), Florida Statutes .

Don’t forget, this provision doesn’t just give a policyholder rights to rescind an AOB within the time periods stated above — it requires that the AOB contract actually contain the statutory language giving the policyholder those rights.

Also, the AOB contract needs to include all of this statutory language. At least one court has suggested that if even part of this language is missing, then the AOB does not meet the requirements of Section 627.7152, Florida Statues, and is therefore invalid and unenforceable. JPJ Servs. LLC v. New Hampshire Ins. Co. , No. 21-14329-CIV, (S.D. Fla. June 3, 2022) .

The AOB contract must explicitly require you to notify the insurance company about the AOB

Florida law requires that an AOB contract “[c]ontain 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. Delivery of the copy of the assignment agreement to the insurer may be made: a. By personal service, overnight delivery, or electronic transmission, with evidence of delivery in the form of a receipt or other paper or electronic acknowledgment by the insurer; or b. To the location designated for receipt of such agreements as specified in the policy.” Section 627.7152(2)(a)(4), Florida Statutes .

When the AOB contract is signed, it must contain an itemized, per-unit cost estimate of the repair work.

Florida law requires that an AOB contract “[c]ontain a written, itemized, per-unit cost estimate of the services to be performed by the assignee.” Section 627.7152(2)(a)(5), Florida Statutes .

Two important notes here.

First, you need to attach the estimate to the AOB before the policyholder signs the AOB . Providing an estimate to the policyholder after the parties sign the AOB puts the AOB at risk of being attacked as unenforceable. Several Florida contractors have learned this the hard way. In one case, a court held that providing the estimate to the property owner just one day after the parties had signed the AOB rendered it unenforceable. JPJ Servs. LLC v. New Hampshire Ins. Co. , No. 21-14329-CIV (S.D. Fla. June 3, 2022) .

Second, the estimate needs to be detailed . A top-line price for the work won’t suffice. Nor will a standard pricing list for products or services. In fact, a Florida appellate court has specifically decided that a standard pricing list for remediation services attached to an AOB did not qualify as an “itemized, per-unit cost estimate” under Section 627.7152(2)(a)(5) and therefore the AOB was void and unenforceable. Air Quality Experts Corp. v. Fam. Sec. Ins. Co., 351 So. 3d 32 (Fla. Dist. Ct. App. 2022) .

The AOB contract must be limited to repairs or mitigation for dwellings and structures

Florida law provides that the AOB contract “must relate only to work to be performed by the assignee for services to protect, repair, restore, or replace a dwelling or structure or to mitigate against further damage to such property.” Section 627.7152(2)(a)(6), Florida Statutes .

The AOB contract must contain a very specific notice to the policyholder

Specifically, Florida law requires that the AOB contract contain the following notice in 18-point uppercase and boldfaced type:

YOU ARE AGREEING TO GIVE UP CERTAIN RIGHTS YOU HAVE UNDER YOUR INSURANCE POLICY TO A THIRD PARTY, WHICH MAY RESULT IN LITIGATION AGAINST YOUR INSURER. PLEASE READ AND UNDERSTAND THIS DOCUMENT BEFORE SIGNING IT. YOU HAVE THE RIGHT TO CANCEL THIS AGREEMENT WITHOUT PENALTY WITHIN 14 DAYS AFTER THE DATE THIS AGREEMENT IS EXECUTED, 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. HOWEVER, YOU ARE OBLIGATED FOR PAYMENT OF ANY CONTRACTED WORK PERFORMED BEFORE THE AGREEMENT IS RESCINDED. THIS AGREEMENT DOES NOT CHANGE YOUR OBLIGATION TO PERFORM THE DUTIES REQUIRED UNDER YOUR PROPERTY INSURANCE POLICY.

Section 627.7152(2)(a)(6), Florida Statutes .

In the AOB contract, you must indemnify the policyholder.

Under Florida law, the AOB must “[c]ontain a provision requiring the assignee to indemnify and hold harmless the assignor from all liabilities, damages, losses, and costs, including, but not limited to, attorney fees.” Section 627.7152(2)(a)(7), Florida Statutes .

The AOB contract cannot contain a penalty or fee for rescission, processing checks, cancelling the agreement, or administrative costs.

Under Florida law, “an assignment agreement may not contain: 1. A penalty or fee for rescission under subparagraph (a)3.; 2. A check or mortgage processing fee; 3. A penalty or fee for cancellation of the agreement; or 4. An administrative fee.” Section 627.7152(2)(b), Florida Statutes .

The Law Requires You to Cooperate with Insurance Carriers

Florida law set out very specific actions that a roofer, mitigation pro, restoration specialist, or other contractor working under an AOB must take when dealing with an insurance company. The requirements are specific enough that it’s worth reproducing the statutory language directly:

A [contractor, roofer, restoration pro, etc.] (a) Must provide the assignor with accurate and up-to-date revised estimates of the scope of work to be performed as supplemental or additional repairs are required. (b) Must perform the work in accordance with accepted industry standards. (c) May not seek payment from the assignor exceeding the applicable deductible under the policy unless the assignor has chosen to have additional work performed at the assignor’s own expense. (d) Must, as a condition precedent to filing suit under the policy, and, if required by the insurer, submit to examinations under oath and recorded statements conducted by the insurer or the insurer’s representative that are reasonably necessary, based on the scope of the work and the complexity of the claim, which examinations and recorded statements must be limited to matters related to the services provided, the cost of the services, and the assignment agreement. (e) Must, as a condition precedent to filing suit under the policy, and, if required by the insurer, participate in appraisal or other alternative dispute resolution methods in accordance with the terms of the policy. Section 627.7152(4), Florida Statutes .

Limited Reimbursements for Emergency Repair AOBs

Contractors should know that Florida law limits insurance reimbursements for emergency repairs, such as roof tarping and water mitigation. Specifically, Section 627.7152(2)(c), Florida Statutes , caps insurance reimbursements for AOB repairs made under “urgent or emergency circumstances” at $3,000 or 1 percent of the applicable Coverage A limit, whichever is greater. Section 627.7152(2)(d), Florida Statutes . In addition, if the AOB contract provides for reimbursement beyond these limits, the AOB is invalid and unenforceable. The statute defines “urgent or emergency circumstances” as “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.”

Collecting Against Policyholders Prohibited

By signing an AOB, you permanently waive your right to collect from or sue the policyholder for payments owed for services described in the AOB. This waiver of your right to collect or sue is fundamental to the AOB, and specifically covered by statutes. In Florida, the waiver applies even if the policyholder rescinds the AOB or the AOB is later held to be invalid.

There are a few important exceptions to the general waiver above. Specifically, a policyholder is responsible for:

Any applicable deductible.
Any betterment ordered and performed that is approved by the named insured.
Any contracted work performed before the assignment agreement is rescinded.

Section 627.7152(7), Florida Statutes .