Great News For Home Owners!
By Harvey V. Cohen, Esq.
Three more victories for restoration companies and assignment of benefits are the outcome of highly anticipated rulings issued by the Fourth District Court of Appeal in Palm Beach County this week. The controversial issues concerned whether homeowners’ insurance policies could prohibit assignments after a loss.
Right on the heels of last month’s ruling from the Fifth District [1], the insurance companies argued that assignment of benefits between a homeowner (policyholder or insured) and water mitigation contractors were not valid under the insurance policies’ anti-assignment and loss payment provisions.
A detailed opinion was issued in One Call Property Services, Inc. as assignee of William Hughes v. Security First Insurance Company, 40 Fla. L. Weekly D1196a (Fla. 4th DCA May 20, 2015), where the Court concluded that the trial court erred in dismissing the complaint based upon the anti-assignment and loss payment provisions. The Court cited Hughes in its two other assignment of benefits orders issued this week, Emergency Services 24, Inc. as assignee of Jay Meiselman v. United Property & Cas. Ins. Co., No. 4D14-576 & 4D14-3320 (Fla. 4th DCA May 20, 2015) (reversed order granting summary judgment) and in ASAP Restoration and Construction, Inc. as assignee of Suzanne Casey v. Tower Hill Signature Ins. Co., No. 4D13-4174 (Fla. 4th DCA May 20, 2015) (reversed order dismissing a complaint).
In Hughes, Security First argued that the assignment of benefits was not a valid contract because the insurance policy had an anti-assignment provision, and benefits were not yet due and owing to the homeowner, Mr. Hughes, at the time of the assignment to One Call Property Services.
Typically, an assignment of benefits is signed by the homeowner at the time the restoration company contractor goes to the property to begin water dry out services. In exchange for the assignment of benefits, the homeowner is not required to pay up front in full for the services. Rather, the contractor receives the right to obtain payment from the insurance company directly in the form of insurance benefits for which services are being provided.
If the contractor does not get the bill paid by the insurance company, the assignment gives the contractor the right to file suit against the insurance company as the assignee of insurance proceeds to the extent of the bill for services as an alternative to seeking full payment from the homeowner.
On appeal was the question whether a homeowner could assign insurance rights on the date of loss, even if the insurance company had not determined if benefits were due and owing and the right to payment was “unaccrued” under the insurance policy’s Loss Payment provision.
One Call Property argued that post-loss assignments of insurance proceeds are valid under Florida law even if the policy contains an anti-assignment clause; that the right to payment accrues on the date of loss; and that the policy’s Loss Payment provision does not invalidate an assignment of benefits or have any bearing on an insured’s ability to assign post-loss benefits.
The Court agreed and held that the Loss Payment provision “falls far short of creating a contractual bar to assignment” since it is merely a clause that addresses the time frame for when the insurance company will issue payment.
The Court concluded that “an assignable right to benefits accrues on the date of loss, even though payment is not yet due under the loss payment clause… there is no reason why an insured could not assign an unaccrued right to benefits under the policy, so long as the assignment took place after the loss. The fact that a right is unaccrued does not necessarily prevent its assignment…”
Another question involved whether an insured homeowner has a “duty to adjust” the claim with their insurance company. Security First maintained that the “duty to adjust” cannot be assigned to a third party, thus invalidating an assignment of benefits to contractor trying to collect payment from the insurance company under a claim.
The theory is that the insurance company would only adjust or negotiate the claim with its insured and not an assignee. The Court rejected this argument and reasoned that an insured is not an “adjuster” and does not “adjust” losses at all, nor does the insured determine the amount that the insurance company will pay to cover the loss.
Since there is no insured’s duty to adjust, a third-party assignee may recover benefits on a covered loss as long as the insured complies with all policy conditions.
Finally, the Court “boils down” the matter to two public policy issues:
On one hand insurance companies say assignments of benefits enable contractors to claim payment for potentially inflated and fraudulent invoices.
On the other hand, assignments are a crucial mechanism that helps homeowners that may not be able to afford an up-front payment for emergency repairs on their home, and instead give their contractor the right to obtain payment directly from the insurance company.
The Court unequivocally states that there is simply “insufficient evidence” to say whether assignments of benefits are significantly increasing the risk to insurance companies.
No doubt the Florida legislature will also examine the questions presented to the Court, and with three new favorable appellate orders, assignment of benefits will continue to help Florida homeowners and the restoration industry together make home and property safe and dry in times of crisis.
Harvey V. Cohen, Esq.
References:
Read the Hughes order here.
Read the Meiselman order here.
Read the Casey order here.
[1] See Accident Cleaners, Inc. v. Universal Ins. Co., 2015 WL 1609973 (Fla. 5th DCA Apr. 10, 2015) where the court held that a post-loss assignee is not required to have an insurable interest at the time of loss. Read it here.
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