Fourth District Court of Appeal Upholds Post-Loss Assignments of Benefits
May 20, 2015
Today, May 20, 2015, the Fourth District Court of Appeal (“DCA”) issued opinions in three separate appeals upholding the validity of assignments of benefits (“AOBs”) and rejecting the argument that a loss payment provision invalidates AOBs that are made before the time for payment under the policy expires.
The Court issued a lengthy opinion in One Call Property Services, Inc. v. Security First Insurance Company, which it then relied upon in its more brief opinions in Emergency Services 24, Inc. v. United Property and Casualty Insurance Company and ASAP Restoration and Construction, Inc. v. Tower Hill Signature Insurance Company.
In all three cases, the insurers argued that the “anti-assignment” and “loss payment” provisions of the policy, when read together, prohibit insureds from assigning their benefits to third parties before the right to payment has accrued. On the other hand, the plaintiffs argued that post-loss assignments are valid under Florida law, the right to payment accrues on the date of loss, and the loss payment provision does not have any bearing on the validity of AOBs. All three cases were dismissed by the trial courts.[1]
On appeal, the Fourth DCA rejected the insurers’ argument and cited Florida case law holding that an insured may institute a lawsuit against its insurer before payment becomes due. The Court reasoned that, if the insured has the right to bring a lawsuit before the time for payment expires, the insured may freely assign that right.
The Court also rejected the argument that AOBs improperly assign a contractual duty to “adjust” the claim from the insured to a third party. This argument is based upon a policy provision which states: “[w]e will adjust all losses with you.” The court explained that “we”-the subject-refers to the insurance carrier and, although the insured has a duty to cooperate, there is no contractual duty imposed upon the insured to “adjust” an insurance claim.
As amici curiae, the insurance industry argued that AOBs allow contractors to unilaterally set the value of a claim and demand payment of fraudulent or inflated invoices, while assignees argued that AOBs permit homeowners to obtain emergency repairs in circumstances when they may not otherwise be able to afford repairs. The Court recognized, but declined to address these competing public policy considerations.
Notably, the Court emphasized that it did not reach any of the other arguments that were made by the insurers, but not addressed by the trial courts below, including whether AOBs violate the public adjusting statute and whether partial assignments are enforceable without the insurer’s consent. On remand, the trial courts are instructed to address these issues. The Court declined to address the argument that AOBs violate the “insurable interest” statute, but noted that the Fifth DCA recently rejected that argument in Accident Cleaners, Inc. v. Universal Insurance Company.
These opinions mark the second wave of recent appellate decisions upholding the validity of post-loss AOBs. Florida appellate courts have now rejected the “insurable interest” and “accrual” arguments, but have yet to directly address several other-possibly stronger-arguments for the invalidity of AOBs.
Insurers should continue to assert these arguments and consider the proper procedural posture for such arguments in order to ensure that an appellate court considers all of the relevant facts and circumstances.
These opinions are not final until any motion for rehearing is decided, or the time for rehearing expires.
Should you have any questions about the implications of these opinions, please contact Colodny Fass.
[1] One Call and ASAP Restoration were dismissed at the motion to dismiss stage, and Emergency Services 24 was dismissed at the summary judgment stage.
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