Last year the Florida Fifth District Court of Appeals rejected an argument by the insurance company that not having the mortgage-holder sign an assignment of benefits made it unenforceable. Security First Insurance Co. v. Florida Office of Insurance Regulation, 232 So.3d 1157 (Fla. 5th DCA 2017). The Florida Fourth District Court of Appeal recently took the opposite position. Restoration 1 of Port St. Lucie v. Ark Royal Insurance Company, Case No. 4D17-1113 (Fla. 4th DCA, September 5, 2018). The 4th DCA opinion hinders a contractor's ability to directly obtain insurance proceeds for repairs. This could, in turn, hinder your ability to have your home repaired after a storm, fire, or flood. Both cases hinged on what is required for a valid and binding “Assignment of Benefits” to a contractor or service provider.
If your home suffers damage that is covered under an insurance policy, contractors will often begin repairs immediately under what is called an Assignment of Benefits. The contractor basically steps into your shoes as the policyholder and has the same rights as you to recover from the insurance company. Assignment of Benefits are beneficial to you because they prevent you from having to pay upfront for the repairs or deal with the insurance company on the claim. They are also beneficial to the contractor because it is a guarantee of payment for work.
The insurance company has incentive to make it difficult for you to assign your benefits to a contactor because contractors will then not be as eager to start repairs. The longer it takes for repairs to commence, the more time the insurance company has to play games. In addition, the insurance company wants to have a say in how extensive your damage is and how much it will actually cost to repair, because they want to reduce these amounts. That becomes more difficult after a competent local contractor determined the extent of the damage, made the repairs, and sent them a bill.
All of these motives have motivated insurance companies for years to lobby legislatures to pass laws that limit and restrict Assignments of Benefits. Insurance companies want this limitation because they know it will be difficult for you, as the policyholder, to get your mortgage-holder to sign an Assignment of Benefits. This gives the insurance company more control over your claim and more opportunities to delay, deny, or underpay your claim.
Unfortunately, the 4th DCA ruled in favor of Ark Royal Insurance Company, allowing insurance companies to require your mortgage-holder sign an Assignment of Benefits to make it valid. Restoration 1 of Port St. Lucie v. Ark Royal Insurance Company, Case No. 4D17-1113 (Fla. 4th DCA, September 5, 2018). This was in direct contradiction to the 5th DCA decision earlier this year finding the mortgage-holder is not required to sign an Assignment of Benefits. Security First Insurance Co. v. Florida Office of Insurance Regulation, 232 So.3d 1157 (Fla. 5th DCA 2017). The Florida Supreme Court may decide to resolve this conflict between the appellate courts unless the Florida Office of Insurance Regulation enacts a new rule or the Legislature enacts a new law. Our state courts here in the Panhandle of Florida are governed by the First District Court of Appeal which has not weighed in on the issue yet.
You should always understand your legal rights before making any decisions about an Assignment of Benefits whether you are an insured (a policyholder) or a contractor. If you have a question about your rights, give us a call. We would be happy to explain your rights without charging any fee or cost.