Bruce D. Partington is a Shareholder and a member of the firm’s General Litigation department. His practices focuses on real property and construction litigation.
Owners, Contractors, and Subcontractors – Beware Florida’s new “Assignment of Benefits” Law
The “Assignment of Benefits” law adopted by the Florida Legislature in 2019 (Laws of Florida 2019-57, now § 627.7152, Fla. Stat.) is a bad deal for everyone except property insurers. The best advice now for everyone involved is to “Just Say No” to assignments of insurance proceeds.
An “Assignment of Benefits” (AOB) is simply an agreement between an insured property owner or tenant, and a repair contractor, where the insured assigns some or all of the insurance “benefits” to the repair contractor who can also then negotiate directly with the insurer. This arrangement has existed in Florida for many years, and while there have been abuses, the new statute is ultimately a remedy in search of a problem, and is ultimately harmful to all involved – except for insurance companies. Luckily (for insurers only), the new law takes effect on July 1, 2019 – just as hurricane season is gearing up.
The law was generated by and for the insurance industry in response to an alleged “crisis” caused by AOBs by insureds to contractors but masquerades as a consumer protection law. Restoration contractors counter this by arguing that insurers wouldn’t pay a fair price for repairs leading to suits against the insurers, which then resulted in insurers having to pay attorneys’ fees to the insured and contractor on top of the judicially determined fair value of the repairs. (Which could, of course, have been avoided had the insurer paid a fair value to begin with.) While there are certainly some bad actors in the restoration contracting field who abused the process, many who deal with insurers on property insurance claims come away with an unfavorable impression of insurers’ conduct. In fact, there are already many hundreds of lawsuits pending in the aftermath of Hurricane Michael against insurers for failing to honor claims or pay adequately for claims – and, remember that Michael went through relatively sparsely areas of the Florida Panhandle.
In brief, what the new law primarily does is: (1) prescribe extensive requirements for an AOB to be valid, including a specific warning in 18 point font; (2) shift the traditional burden of showing “prejudice” from the insurer to the assignee; (3) provide that assignee contractors lose rights to recover against the owners, including lien rights for both themselves and their subcontractors; (4) restrict the longstanding rights of an insured to recover attorneys’ fees from their insurers when the insurers don’t pay; and (5) permit policies to prohibit AOBs entirely.
Why it’s bad for owners:
Why it’s bad for contractors and subcontractors:
In addition to the things listed above….
The Florida Legislature has shown once again that it is susceptible to the outsize influence of the insurance industry by passing a law that disadvantages everyone in the process except insurers. While cast as a “consumer protection” bill, the new AOB law benefits only insurers and harms their insureds, contractors, and subcontractors. It is, in essence, solving a problem with a sledgehammer that could have been handled with a finishing nail.
About Clark Partington:
Clark Partington constantly surveys the ever-changing legal landscape to provide up-to-date and responsive counsel to our clients. Clark Partington is the largest business focused firm in the Florida panhandle with offices in Pensacola, Destin, Grayton Beach & Tallahassee. The firm also maintains a presence in South Alabama with an Orange Beach office. Since 1976 Clark Partington has grown to over forty lawyers and has served the people and businesses of Florida through an innovative and collaborative approach to practicing law. Our lawyers are consistently recognized for their service to the profession and excellence in the courtroom. More information about the firm’s practice, its attorneys, and recognitions may be found at www.clarkpartington.com.
This publication should not be construed as legal advice. Its applicability is dependent upon specific facts and circumstances and is provided for informational purposes only. You should not act upon this information without seeking advice from a lawyer licensed in your own state.